Good afternoon. This is the course call conference operator. Welcome, and thank you for joining the ERG Second Quarter 2025 Results conference call. 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 may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Paolo Merli, CEO of ERG. Please go ahead, sir.
Good afternoon, everyone, and welcome to our quarterly results presentation. Here with me, as usual, Michele, our CFO. Let's get started with an overview of results over the period. I am on page number four. First of all, let me put the results into context. The first half of the year, including the second quarter, was characterized by a much lower wind speed than last year and historical average. I'll soon share the results of a historical wind analysis conducted by our experts. Against this backdrop, in the first half, our EBITDA closed at EUR 274 million, slightly down, minus 3% year on year. While looking at Q2, results got back to positive with EBITDA at EUR 128 million, plus 11% year on year. There were two major effects behind this performance.
On one end, and this is true for the semester and for the second quarter, on one end, the much weaker production on a like-for-like basis, partially offset, this is the second effect, by the contribution from new installed capacity. With the first repowering projects now up and running and the full contribution of the U.S. asset portfolio, which I remind you is being consolidated as of April 1, 2024. Despite the higher prices on screens, all in all, the price effect on a year-on-year basis was just marginally positive as the lower production resulted in lower merchant volumes. Investments amounted to EUR 143 million, significantly down year on year. I remind you that the reduction is mainly due to the fact that the CapEx in the first half of last year included the acquisition of a wind and solar portfolio in the U.S. and a smaller one in France.
Out of the total invested in the first half this year, about 50% was again related to M&A, with the acquisition of Broken Cross Wind Farm in the U.K., and the remaining about 50% allocated to organic development, mainly greenfield and repowering in France, Germany, Italy, and the U.K.. Bottom line, adjusted net profit in the first half was EUR 83 million, down 22% year on year, due to the already mentioned decline in EBITDA, higher depreciation, and financial charges linked to new assets. Again, looking at Q2, earning direction returned positive with net profit at EUR 34 million, up 21% year on year. Net financial position at 30 June was EUR 1,949,000,000, plus 9% higher versus the end of 2024, discounting also, not just the investments, a total distribution, I mean dividends and buyback of roughly EUR 160 million, which basically fully justifies the increase.
Michele Pedemonte will provide more details on the cash flow over the period. As mentioned, I'm now commenting page number five. As mentioned, the economic results of the period were significantly impacted by unfavorable wind conditions throughout Europe. The economic impact of lower volumes, I mean on a like-for-like basis versus our budget and versus last year in the first half, was in the order of EUR 50-EUR 60 million. I think it's important for you to understand the magnitude of this event. The map above shows the usual map that we are posting on our web because the map shows the deviation of wind speed from its long-term average, say, in Europe, in this case, in Q2. Dark blue indicates the areas where the negative deviation is greatest.
It's quite unusual to see a situation like this with weak wind virtually everywhere in the regions where we have installed capacity, I mean, everywhere, say, across Europe. This map in Q1, and you can find it in the last webcast presentation, was even worse. This prolonged wind drought was caused by a persistent high-pressure system all over Europe. Please consider that production of a wind turbine moves proportionally to the wind speed with a multiplication factor of two to 2.5 times, which translated in simpler words means that if the wind speed drops by 5%, the production will drop by 10%- 12% on average. According to national public data, these are data published by the national TSO, wind power production during the period on a like-for-like basis decreased year on year by 17% in Italy, as shown in the chart. Those are the data published by Terna.
I tell you, they are not here, but in France, the same, minus 15%, minus 25% in Germany, and minus 25% in Poland. Those, I repeat, are national data, even though our own trends over the period were pretty similar. As said, we conducted an internal analysis to understand better, also in light of the magnitude of the event. The graph below shows the average wind speed recorded over the first half of the last 85 years in Europe, dating back to 1940. We were inspired by some public study issued by other independent institutions to do this analysis. The result confirmed that this semester, 2025, first half, was extraordinarily weak. We repeated the analysis in every European country where we operate, and the result was very similar. In each country, the wind drought over the period was among the worst ever recorded, not the worst, but among.
In Europe, as an aggregate that is shown here in the chart, it is lower because this phenomenon was all over Europe. This analysis led us to a couple of conclusions, very simple. First, wind speeds have always been erratic, and historical data show that this type of wind installed wind capacity, but this event was always there. It is difficult to say there is a clear trend related to climate change. These are the same conclusions other independent third-party analysis came to. Among the institutions that said that, I would include also the International Energy Agency. The second consideration is that in this specific case, geographic diversification across Europe proved less effective because, as I already said, the wind drought was well distributed all over the continent.
The good news is that over the last couple of months, wind speed has gone back to normal, and this makes us confident about our full-year guidance, which I anticipate will be confirmed. I move to page number six. Over the period, we continued to deliver on our strategy. We are very pleased with the completion of our first battery storage plant in Vicari, Sicily, 13 MW, as flexibility is becoming increasingly important. We also completed construction of the Corlacky Wind Farm in Northern Ireland. The 47-megawatt plant is now operational and in its ramp-up phase, and we expect it to reach its full potential over the next few months. We are also advancing our project pipeline with 50 MW of greenfield and repowering projects in France, Germany, Italy, fully authorized.
I'm also very pleased to say that we, this morning, signed a long-term PPA, pay-as-produced, with A2A, which will cover about 90% of the expected production from the Castelvetrano Salemi Wind Farm in Sicily, again, a repowering project that has been operational since December last year. The PPA will be effective as of January 1, 2027, and will substitute the CFD tariff that was awarded in an auction held a couple of years ago under the FER1 2019 decree. In addition to that, we have been awarded the largest part of the first auction launched by FS Group, which is the state-owned railways company. This is through three different PPAs with an aggregate amount of about 180 GWh per year, with a tenure of 5- 10 years. This is an extremely important achievement as it refers to existing wind projects already out of the incentive scheme.
Overall, in the first half, we proved once again successful in securing at attractive conditions both new capacity and existing one, leveraging on our expertise in the PPA market. Regarding ESG, we have once again confirmed our position among the top-tier companies in all aspects of our sustainability strategy. We ranked first in the Identity Corporate Index. We were confirmed on the CDP A list and renewed our gender equality certification in Italy, clearly recognizing our strong commitment to the topic. Now to Michele for his review of results in more details.
Thank you, Paolo. In the second quarter, power market prices have been slightly higher than the second quarter of 2024 across all countries where ERG operates. However, as you know, this trend had only limited effect on our all-in unitary revenues due to the closely regulated nature of our business model. In Italy, the wind unitary revenues stood at EUR 120/MWh in line with the second quarter of 2024. Despite the increase of the green incentive value rising to EUR 55/MWh against EUR 42 /MWh and the higher power market price, overall, the unitary revenues remained stable. This was mainly due to short-term hedging strategies executed at the lower prices compared to the previous year. In France, the increase in unitary revenues was driven by higher short-term hedging prices, combined with a more favorable market environment captured by few merchant assets.
In Germany, capture prices in the second quarter are aligned to the second quarter of 2024 at EUR 94 /MWh . In Poland, unitary revenues increased during the second quarter, primarily driven by the short-term hedging. In the U.K., the capture price is around EUR 74/MWh , higher than the second quarter of 2024, thanks to higher short-term hedging. Note that this figure, as usual, does not include revenues from balancing services. As for solar all-in unitary revenues, we recorded a decrease in the second quarter in Italy, mainly due to lower hedging prices. In Spain, capture prices were impacted by the current market environment with a significant profile effect during daylight hours. In France, solar revenues are sold at fit prices compared against 2024 when the energy produced by assets acquired in 2024 itself was sold at merchant prices.
Energy plants in the US have unitary revenues that reflect the PPA prices, so very stable. Now, focus on production. In the second quarter of 2024, the group's overall production was in line with the previous year. This stability was mainly driven by perimeter effects, which offset the persistently low wind conditions across Europe. In Italy, we have 654 GWh, plus 2%, mainly due to perimeter effect coming from repowered and revamped assets, spotting with both in wind and solar, offset by low windiness. In France, 266 GWh, thanks to new benefit assets entering operation during 2024 and the second quarter of 2025, and a solar plant acquired in 2024, again offset by low wind conditions. In Germany, 107 GWh, minus 6% due to lower wind conditions.
In the U.K. and Nordics, 137 GWh in line with last year, mainly thanks to the new asset acquired in January in Scotland, partially offset by low windiness in the U.K. In Spain, 149 GWh due to lower irradiation, minus 11%. In the US, 248 GWh, minus 6% due to lower wind conditions. Eastern Europe was the only region where we recorded improved wind conditions with production reaching 160 GWh, up 15% year on year. In the first half, the production has been 3.7 terawatt-hour, aligned with the first half of 2024, mainly due to perimeter effect, 0.6 terawatt-hour, of which 0.3 terawatt-hour in the US, partially offset by extremely low wind conditions in Europe. Please note that we began to consolidate US assets in the second quarter of 2024. In the second quarter of the year, EBITDA reached EUR 128 million, EUR 12 million more than the second quarter of 2024.
This growth was mainly due to perimeter effect, EUR 9 million, linked to the newly acquired assets and organic development, as well as higher capture prices. These positive drivers were partially offset by the already mentioned weak wind conditions across Europe. In Italy, EBITDA reached EUR 85 million, an increase of EUR 5 million year on year, primarily driven by new investment in both wind and solar. This was partially offset by unfavorable wind conditions and lower capture prices on solar assets. In France, EBITDA is EUR 5 million, higher than last year, supported by higher capture prices in wind assets and perimeter growth, partially offset by low wind availability again. In Germany, EBITDA is EUR 5 million, EUR 2 million lower than the previous year, mainly due to persistently weak wind conditions. In Eastern Europe, EBITDA is EUR 11 million, EUR 3 million higher than the previous year, mainly driven by higher wind resources.
In the U.K. and Nordics, EBITDA is EUR 7 million, up to EUR 2 million, thanks to the contribution of the new acquired assets in Scotland. In Spain, EBITDA is EUR 2 million, lower than last year, impacted by reduced production and lower capture prices. This was due to both intraday profile effects and short-term hedging at less favorable price levels compared to the previous year. In the US, the EBITDA is EUR 10 million, EUR 2 million lower than the previous year due to lower production in the quarter. In the first half of 2025, EBITDA is EUR 274 million, lower than the previous year by EUR 7 million, mainly driven by the persistent low wind conditions in Europe, partially offset by perimeter effect. The second quarter allowed us to partially recover the underperformance of the first quarter, heavily affected by poor windiness across Europe. Let's comment now on the investment.
In the second quarter, we invest EUR 28 million, mainly due to ongoing construction in the U.K., France, and Italy. In particular, we spent organic capital for EUR 10 million in the U.K., mainly for the construction of the Korlachi Wind Farm, 47 MW. EUR 12 million in Italy refer in particular to our first battery storage plant and some revamping and repowering activities, and EUR 4 million for the beginning of our first repowering project in France. The second quarter of 2024 includes EUR 235 million for the acquisition in the US. In the first half of 2025, investments amount to EUR 143 million, of which EUR 72 million of acquisition in the U.K. versus EUR 444 million of the first half of 2024, which includes the acquisition in France and the US for a total amount of EUR 319 million. Let's now move on to the financial, commenting on the other item of the provision laws.
In the second quarter, amortization of depreciation is EUR 69 million, in line with the second quarter of 2024. Net financial charges are EUR 12 million versus EUR 7 million in the second quarter last year. Financial charges versus banks and bondholders, net of repeated remuneration, stand at EUR 8 million, EUR 4 million up in comparison with last year, due to perimeter effect and lower remuneration on cash. The complement to EUR 12 million, EUR 4 million are non-cash accounting items, such as effects coming from tax equity partnerships in the US or figurative lease, interest expenses according to IFRS 16. The tax rate in the quarter is 26%, lower than 30% of last year due to different contributions of various countries to the taxable result. The adjusted net profit of the quarter amounts to EUR 34 million, higher than last year, EUR 28 million, mainly driven by the already commented EBITDA, partially compensated by higher financial charges.
The adjusted net profit for the first half amounts to EUR 83 million. Finally, let's take a look at the cash flow statement and net financial position. The net financial debt at the end of the first half is EUR 1.9 billion, EUR 0.2 billion higher than the end of 2023, mainly driven by the dividend payments and the investment of the period, partially met by the cash generation from EBITDA. The net working capital is affected by dynamics due to payable for investments. Thank you for your time. Now I leave the floor to Paolo for his final comments.
Thank you, Michele. Now let's see our guidance for the full year. As you know, the EBITDA guidance given during the last webcast already took into account the low winds since April. Unfortunately, this trend continued, although to a lesser extent in May. June was almost near budget, while July is doing well. It seems that some sort of return to normality is taking place. When assuming windiness in line with the historical average from now on, we are still confident that we can approach the midpoint of the guidance range. To reach the upper part of the range, however, we would need windiness above the historical average, assuming a recovery or at least a partial recovery in the second half of the year of what we have lost in the first. We confirmed our EBITDA guidance within a range of EUR 540-600 million.
CapEx is also confirmed within the range of EUR 190-140 million, as well as net financial position at year end within the range of EUR 1.85 billion- EUR 1.95 billion. Thank you for listening, and we are now ready to take your questions.
Thank you, sir. This is the course call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use handsets when asking questions. The first question comes from Enrico Bartoli of Mediobanca.
Hi, and good afternoon. First, thank you for taking my question. Actually, I have three. The first one is related to the FER1 auctions that are expected to be held shortly. If you can share with us your response for the process and, let's say, the amount of capacity that you are planning to participate in the tenders and some comments, if possible, on the level of competition that you expect from the first auction. The second question is related to the U.S. There were several changes in the regulation recently. If you can share with us, let's say, your view on the potential for ERG in this market and, let's say, the possibility to access the one- gigawatt pipeline that you have in the country. The third one is related to battery storage.
You're highlighting that actually, you had the first battery storage plant in operation in the past quarter. I'm wondering, let's say, if you think that even, let's say, there could be an acceleration in the investments by ERG in this technology. If I remember well, you had a 4.6 GW pipeline in March. If you are planning to participate in the Maxi auctions and maybe some comment on the level of profitability that you think can be achieved in the Italian market. Sorry for the many questions.
Thank you. Thank you, Enrico. For ERG, yes, sure, we have a few projects that are going to take part in the auction. All in all, we think roughly 130 or a little bit more, 130 MW or a little bit more than that. Most of them, basically 95%, are wind and repowering projects. We expect a fierce competition because based on the manifestation of interest, there are 2.9 GW of wind capacity that is going to take part in the auction and 17 to the PV auction, even though we are more focused now on wind. Of course, the price at which we are going to bid is very confidential. The auction is already open and is going to close. The last day it's possible to submit bids is on the 12th of September. The outcome of the results should be published by GSE within November.
December.A December. Let's see how it's going. I think even today, with the PPA signed with A2A, there is a clear knowledge and capacity of the company to find other route markets. We are confident that either through the CFD, awarded two auctions, or PPA, we'll be able to carry on our product. We would have liked to bring more capacity to the FER1, but unfortunately, we are in Italy and we have some Autorizzazione Unica on some projects, for instance, in Sardinia, that are struggling to find the right framework to be implemented because of the hostile behavior, say, of the region that has issued the Autorizzazione Unica for our Nulvi-Ploaghe wind farm, which is more than 100 MW, but subject to several condition precedents that make basically the project, say, not feasible.
You know that we have been fighting on these projects for the last six, seven years because we submitted the first documents for the permitting in 2018. I make the story short, but through ups and downs, the project was authorized in 2022 by the Prime Minister, Mario Draghi, to, say, find an equilibrium between the different opinions of different institutions around the project. The decision was appealed by the Sardinia region and, say, avoiding to say what is in between, the last move was the administrative court that ruled in our favor, forcing the region to issue the permit. If not, the prefect would have issued the permit on behalf of the region. The region yesterday issued the Autorizzazione Unica, but as I said, full of tricks and preconditions.
The most likely scenario, we want to go through it, but is that we are going to appeal or challenge this Autorizzazione Unica to the Supreme Court. We are absolutely confident that we are on the right part of the reality, and we are quite confident that this Autorizzazione Unica was issued, say, intentionally to be challenged in order to prevent the prefect to issue the Autorizzazione Unica that in that case would have been for sure clean and not subject to all these conditions. We are really, say, annoyed by this situation, but we keep going on because we are confident that in the end, our rights and interests will be safeguarded by the appropriate authorities. For the time being, this project that we thought it was going to take part to the auction, we decided to not because before we have to make clear the situation around it.
It's not just a business case. It's becoming a matter of principle now. Okay. The first question was this: in the U.S., yes, the regulation is evolving. Mr. Trump, the President, is quite clear that he's a little bit against the development of renewables. In particular, there is an executive order or a law that is envisaging the phase-out, say, of the tax equity schemes in a couple of years. Based on our business model and based on our approach to the country, we don't expect direct consequences on us. I mean, we do not expect any retroactive actions. The portfolio we are running now is not going to be affected by this new regulation. For sure, this new regulation would make it harder for developers to install new capacity, authorize new capacity. Still, you know that our model is to buy assets on a totally derisked framework.
I mean, when they have already the PPA, when they have already the COD, the commercial operation date, and in case there are no tax equity schemes, we would price this new layout and the project. We do not expect any particular direct consequence. For sure, even for us, it would be tougher to grow. We are also in this moment, in these days, elaborating some offers to submit to our partner, Apex, because this was part of the agreement. Let's see if we can find, say, an agreement. The targets we set out for our business plan remain the same. Best, yes, we are very happy and satisfied that we put in operation our first storage system, 13 MW in Vicari, Sicily, nearby our wind farm. It's also an occasion for us to learn how to manage this kind of asset. It's in intercorrelation with the wind assets.
We are working very hard to carry on our pipeline of battery storage. I would say more. We are trying to switch some solar projects into battery storage projects. This is true in Spain for sure, but also in Italy because flexibility, we think, is going to be a game changer in the market. We see every day the duck curve in the 24-hour price profile that is very much influenced by the penetration of solar plants that are producing just on a daily hour. Battery storage, we are quite sure, is a stream that is going to be under strong growth for the years to come. I hope to have answered your questions, Enrico.
Yes, just a comment on, let's say, the participation to the next auction. What do you think that the profitability could be in that auction?
Yesterday, they published the new number for the Maxi. They set out the EUR 7,000/MWh , which is a little bit higher than what we were expecting. We look at it, I mean, at Maxi with high interest. We have not that much capacity with which to participate in this auction, but some just small projects. I'm talking about some tens of megawatts and not more than that. We are trying to explore also on the secondary market if there are projects to buy, I mean, in terms of permission, in terms of permitting that are eligible to participate in the auction. Let us work, and we need a couple of months to understand better what we can do in this auction. Looking forward, for sure, battery is a new stream of revenues, a new stream of business.
Perfect. Thank you very much.
You're welcome.
The next question is from Emanuele Oggioni of Kepler Cheuvreux.
Good afternoon, and thank you for taking my question as well. I have a first one on the hedging policy for 2026. If you can update on next year because basically this year is already fully hedged. The second question is a precisation, but basically you have already answered before about the recently today signed PPAs with A2A and in general your policy based on your previous statement. Also, when you sign a PPA in Italy, basically this means that the level of power price agreed, obviously it's not disclosed, I will not ask for, is so the level of the PPA, the power price of the PPA is higher than what you expect from other auctions or other levels of profitability you expected, for example, for the next auction, etc. I could confirm this. Finally, I have a question on the share buyback.
I know you have a dividend policy and attached also an additional share buyback plan, but I wonder if considering the depressed level and depressed evaluation, could be the right time to think about an increase in this share buyback plan. Thank you.
Okay. Regarding hedging, we are carrying at a level of 70% of our hedging for 2026. We are building up our short-term hedging position in order to begin the new year, 2026, with the plan leveraging in the region of 80%. We are progressing following our usual policy, also on short-term hedging. For sure, we take into account also the long-term hedging that we have just closed with the Federal Grid Restart and with A2A and take this into consideration for our hedging percentage. Overall, the target is to reach by the end of the year roughly the 80%.
Okay. I can just elaborate a little bit more on your second question on top of what Michele just said. Yeah, we're quite happy about the PPA with A2A and also the three PPAs we have been awarded through an auction system with the FS Group, the railway corporate. This is particularly interesting for us because basically it's covering production coming from old assets, so assets that have already phased out from any incentive scheme and then make their business case more sustainable for the long term. We think this kind of market is going to develop quite substantially going forward. Even the government in the last, the so-called Bollette decree , was envisaging at Article 3 the possibility for GSE to launch a tender for a long-term contract between private off-takers and producers.
We think that the coupling, the so-called coupling between the day-ahead market and long-term mechanisms, will develop along this way. The share buyback, I can just say that the last general meeting ruled for 10% share buyback optionality to buy back own shares up to 10% of the capital. This delibera should translate when and if in a delibera of our board of directors that so far has not decided anything about this. By the end of the year, we will make a point on this. I can say, sorry, just to touch a point you raised in your previous question about PPA. Of course, I can say the price. I confirm that we are talking about a fixed price on a pay-as-produced formula, say, for the A2A contract. The other one is a more base load, but still we can provide this energy coming from our portfolio.
About the price, don't forget the Castelvetrano Salemi was already awarded a tariff of EUR 64/MWh . It's easy to understand that the pricing should be better than that. If not, there was no point in signing this contract.
Thank you, very clear. If I may follow up on the hedging as regards the pricing, the moving average, I think the rolling moving average of the hedging has improved for 2026, considering the year-to-date higher power prices, at least higher than expected for me.
Yeah, you're right. There is a mild increase, but consider that we build up the position week by week. We tend to follow the progress of the price during the months. You don't have to take the bankable position today to consider our level of hedging for 2026.
Thank you.
The next question is from Roberto Letizia of Equita.
Yes, good evening. Thanks a lot for taking my question. The first question is a follow-up on the U.S. market. Just wondering if, without taking into consideration incentives, so just looking at market conditions and also taking into consideration the new trends of demands based on data centers, if in any way market conditions justify build-up of plants out of your pipeline so that you cannot be worried about local policies and just look into the market condition through PPAs as normal merchant positions. Just wondering if the market is envisaging and is supporting this optionality. The second question is more strategic. I was wondering, what would you consider as the right market conditions in order to go back to a different growth rate path?
Being less focused on the balance sheet and maybe use it a bit more to follow additional optionalities that may arrive, which may be the best as well, or different technologies or different countries that offer growth opportunities. If you can tell us what would be the best market condition for you to expand the balance sheet and pursue a higher growth rate. Thanks a lot.
Hey, about the US, it's very difficult to say how the market will pan out given the changes that are now undergoing there. Honestly, I have to say that when looking at the projects, I mean, when we are making our due diligence exercise, we have noticed that most of the projects struggle to have a fair value that is in line with the CapEx the developers have spent to bring the asset into operation. The IRA, honestly, with all these tax benefits and so on, paid upfront, it's like our super bonus 110. I mean, I think you know what I mean. This has created a big inflation. Sometimes when comparing the CapEx per megawatt, both for solar and wind in the U.S. versus Europe, you see that there, in the US, this ratio is much, much higher than in Europe.
Of course, if all these fiscal benefits will be eliminated or will progressively phase out, for sure, the U.S. market would need to rebalance in terms of CapEx per megawatt and so on. Difficult to say, but we are in a, I don't want to appear too optimistic, but we are in a kind of safe haven because we are not obliged to buy. For sure, the only point I believe is not moving is our financial discipline. We want to grow there. We still believe it's a great market because consumptions and the economy are very hot there, but still at the right condition. That leads me to your last questions, which are the right market conditions. The thing that is worrying me the most is the missing electrification of consumptions.
I mean, in Europe, but all around the world, we keep installing renewable capacity, but we are not seeing the same growth in terms of electricity demand. I think we need to push on electrification. This is very important. So far, we haven't seen a sign and the right commitment also of the European Commission towards this point. Till there, there are no conditions to accelerate on the deployment of investments. When there is a turning point on this, and sooner or later, it will happen, I'm sure, because the decarbonization is an unstoppable process. Speed, and this speed is an important point. Whenever we have a sign, a clear sign that this trend is changing, we can consider an acceleration.
Very clear. Thanks a lot for your help.
Thank you.
The next question, sir, is from Alex Roussier of Bank of America.
Hi. Thanks for taking my question. I just had one simple one, if I may. It was regarding wind speed condition in July. I think on some of the data that I can get, it looks like wind conditions are actually quite good and actually much better than historical average. I know guidance is kind of at normal condition for the rest of the year, but have you seen similar, better wind condition trends as of July, or is that just, you think, a little bit of a data phasing or perhaps a sporadic data point? Thank you.
I confirm that over the last couple of weeks, wind is strong, in particular in Italy. You know that Italy is very important for us because here prices are higher and also a portion of our production is still getting the green certificates, let me call it like this. Also in France and in Germany, U.K., and even Sweden, we are now seeing better conditions. It seems like we are getting back to normal. I mean, in terms of wind speed, it's very difficult. We conducted an internal analysis, which is much more in-depth than the executive summary that we have shown through this webcast. Basically, the analysis confirms that this kind of volatility in wind presence has always been there. In Italy, we had a wind drought like the current one in the 1980s, in Germany in the 1960s.
Back in time, that means probably that climate change is not the main driver behind it. This is also the outcome of other institutions that said that it's impossible to find a clear and straightforward link between climate change and the wind speed. In fact, not 10 years ago, but one year ago, in the first four months of 2024, wind was exceptional, exceptionally good. The other way. I hope to have answered your question.
That's all good. Thank you.
Thank you.
The next question is from Davide Candela of Intesa Sanpaolo.
Hi. Good afternoon, everyone. Thanks for the presentation and for taking my question. The first one is a follow-up on the answer you gave on the demand side and on the electrification. I was wondering if you can broaden your answer, sharing your view about what is preventing electrification in your view to build up. Actually, is it the fact that the prices are high, so they are preventing more consumption, or are there energy efficiencies that are going the opposite way? Just your view on that will be helpful. Second question with regards to M&A, it looks like to me that the market is enhanced a little bit, or at least the wind in between the buyer and the sell side have approached. The parties have approached. Are you seeing that sort of evolution in the market?
If that's so, are you willing or considering some little opportunities in Europe, and just for that, an update to build up growth. Thank you.
Okay. About the electrification of consumption, the streams the electrification should come from are the heating and cooling, air conditioning through heat pumps instead of gas boilers. A switch that would allow a switch from gas to electricity, electric vehicles, and data centers, that is the only stream that is going well. Green hydrogen produced, green means that hydrogen is produced through an electrolysis process supplied by green energy, renewable energy. All these streams are not growing at the speed needed to support the electrification of consumption as initially expected by the European Commission. The European Commission has allocated EUR 100 billion to sustain the electrification of consumption. You asked for my view.
My view is it's not enough because EUR 100 billion for 27 countries that are part of the Union, in the end, is peanuts, let me use this term, compared to the EUR 700 billion they want to invest in military services or the EUR 300 billion Ursula von der Leyen committed to Mr. Trump for buying gas from the U.S. I think we must do more, but I'm sure that sooner or later it will happen because if not, the industry will slow down very, very significantly. The market will become more a biased market. To come to your last questions, yes, the M&A will become easier than it is now. For the time being, the market, the private market, the secondary market is still tight.
Supply and demand are not matching in the sense that the expectation of sellers are still very high, while the buyers are a little bit more cautious in allocating a certain value. The M&A transactions, I'm not saying it's not my opinion. There are public data showing these are quite slowing down quite considerably. This could be an opportunity for us that we have a strong balance sheet. Sooner or later, we keep scouting the market. Even in these days, we have submitted several non-binding offers to see if there are good opportunities for us. Let's see. M&A, for sure, has always been a tool, a successful tool through which a company created value, and we still believe it's the case.
Thank you.
You're welcome.
The next question is from Francesco Sala of Banca Akros.
Yes. Good afternoon. Thank you for the presentation and for taking my questions. What have you seen in the last few weeks or months in terms of wind turbines and solar panel costs and more in general construction costs? Secondly, I wonder whether you have seen in particular some disruptions or bottlenecks from China, also in the light of the Chinese government push to reduce capacity. Thank you.
I'll say maybe let Michele elaborate more because he's in charge of procurement for the group. I'm happy to say that over the last months, we are seeing for the first time a change in direction in the CapEx trend for wind. European OEMs are becoming more aggressive now because they want to place orders and they want to prevent Chinese competition to prevail on the market. They want to avoid what already happened in the solar field. For both technology, but for solar it was more expected, we are seeing a downward trend in the CapEx line. I mean, the CapEx per megawatt. Michele will be more precise on that.
Yeah. In addition, I would add that we don't see any particular disruption on the supply, in particular for wind. That is our core technology. Regarding wind technology, you know that we are always scouting also alternatives to traditional Western suppliers. We are open. We consider also alternative suppliers. The key point is that we look at this opportunity from an industrial standpoint. We don't value just the CapEx cost at the beginning, but also the production in the long term, the efficiency of the wind turbine in the long term. We put all the elements in our evaluation. On a case-by-case basis, we try to find the right technology for each specific wind project because every wind project is different from another in terms of characteristics of the sites, characteristics of the wind, permitting constraints, and so on. We consider all the technologies.
As said by Paolo, we are seeing some improvement in the scenario in the last months because the competition is increasing in the market. From our standpoint, this is a positive element.
Thank you.
I'm going to, at this time, there are no more questions registered.
Thank you all for listening, and I wish you a super summer. See you in October or November.
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