Good afternoon, this is the Chorus Call conference operator. Welcome and thank you for joining the Italgas Full Year 2024 Results Conference Call. As a reminder, all participants are on 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 Anna Maria Scaglia, Head of IR of Italgas. Please go ahead.
Hi, good afternoon to everyone and thank you for joining us today. We will walk you through Full Year 2024 Results of Italgas. I'm here with our CEO, Mr. Paolo Gallo, and Mr. Gianfranco Amoroso, our CFO. And as the operator said, we will address questions at the end of the presentation. I leave now the floor to our CEO, Mr. Paolo Gallo.
Good afternoon to everybody. Good afternoon to the call either directly or through the web. I'm going to illustrate the result that we have achieved in 2024. I'm here with Gianfranco Amoroso, our CFO. And I'm moving to slide number two. That is a summary of our results. Let me say that 2024 is a year that is probably going to be a historical milestone for Italgas Group with the announcement of the agreement to acquire 2i Rete Gas. The acquisition will create the European gas distribution champion, unlocking significant value creation for all stakeholders, not only our shareholders, but for the energy system as a whole. We are in the progress since the announcement of the deal toward the closing. We remain confident that we should achieve closing of the deal in line with the already anticipated timetable.
But today, we would like to take you through our results that are, let me say, very significant. And the numbers once more prove the strength of our business model, prove that our vision for the future is the right one. And Italgas has achieved incredible results that are in line with the strategic plan that we presented just in October. EBITDA, Adjusted EBITDA, has grown by 14%, led by gas distribution both in Italy and in Greece, and thanks to the positive contribution of our water business. Adjusted net income grew by more than 15%, accelerating on the growth path of the last seven years. And we reached an incredible and outstanding result that we passed the EUR 1 billion cash flow, almost double the result of last year. With the end of 2024, we have reached the 32nd quarter of consecutive growth. It is really an outstanding result.
You should not forget what has been announced very recently regarding our sustainability performance. I mentioned the recent inclusion in the CDP A List for climate change. Based on the result achieved today, the Board of Directors resolved to propose to the next General Assembly that is going to happen on May 13 to distribute a dividend of EUR 0.406 per share regarding financial year 2024. That is more than 50% higher than last year, demonstrating another time that our dividend policy is creating value for our shareholders. If I pass to the numbers, so I will move to slide number three, you can see that our revenues have been steady, notwithstanding the significant reduction of revenues coming from the energy efficiency, as expected.
That loss of revenues that were absolutely expected by us was compensated by the increase of revenues in gas distribution in Italy and in Greece, and the contribution of Acqua Campania that, as you know, from February 1st, 2024, has been fully consolidated in our numbers. Our adjusted EBITDA grew by 14.1%, driven by the positive contribution of the regulated business and also benefiting from the cost control. We will get into a moment and the EBITDA is at the top of the guidance range. Adjusted EBIT and net income improved even more, offsetting the higher depreciation, interest rate, and taxes. Gianfranco Amoroso will give you more details and more flavor about these numbers. Overall, adjusted net income grew by more than 15% versus last year.
If we move to slide number four, as I anticipated, the operating cash flow nearly doubled in respect of last year, nearly reached EUR 1.1 billion. Of course, last year was heavily impacted by the Superbonus cash absorption, but still EUR 1.1 billion cash flow generation is an incredible result that we have never achieved earlier. Thanks to this operating cash flow, we were able to fully repay the CapEx, the M&A activity during 2024, and partially the nearly EUR 300 million that we pay as a dividend. So again, in terms of financial discipline, it has been an extremely positive year. The CapEx of nearly EUR 900 million was slightly lower compared to the previous year, 2023, but well in line with the guidance. I will give you more details in the following slide.
So if we move to slide number five, we can have a more detailed explanation about our CapEx. The decrease in respect, the small decrease in respect of last year is mainly driven by, one, lower spending in digitization, as many projects are near completion. You know that we have already reached 90% of our digitized network by the end of 2024, and we are going to fully complete it in 2025. And slightly lower centralized CapEx. This reduction in CapEx, in the centralized CapEx, has no impact on the RAB because, as you know, the centralized RAB is updated annually and is not based on what we currently spend, but is based on the number of redelivery points that we manage. So if you look at the remaining part, the third category is development and repurposing. We spent nearly EUR 540 million.
That is fully in line with last year. But if we talk about physical network, we laid more than 750 km of pipes, of which nearly 400 only in Greece. So the effort to extend and to upgrade and repurpose our network has been extremely significant. Let's take a look at the environmental performance. We are on page six. This number does not include Acqua Campania. Even if Acqua Campania is fully consolidated, we will see it in 2024, five included. The reason is because we wanted to compare the numbers in 2024 with the number of the previous year. As you can see, the net energy consumption was down by nearly 7% in respect of last year, where the main contribution is coming from gas consumption. You know that we use gas to heat as a preheating system to heat our gas that has to be distributed.
We were able to reduce the specific gas consumption ratio by more than 12%. We moved from 0.88 to 0.77. We were able to reduce the overall gas consumption, even though the overall gas distribution has remained steady in respect of 2023. We achieved savings in terms of energy consumption everywhere, so in vehicles, in buildings, in electricity, everywhere. Regarding emissions, emissions have made a significant step forward. I mean, we are ahead of our targets by far, and that is thanks to the Picarro technology and thanks to the fact that in 2024, we inspected more than 150% of our network. We inspected nearly 130,000 km of network, an increase of 33% in respect to 2023. Thanks to this activity, extensive activity in the technology, we have seen a significant reduction in terms of gas leaks.
That's the reason why Scope one and two emissions decreased by nearly 21% in respect to 2023 and by more than 40% in respect of our baseline that is to the 2020. We are clearly ahead of schedule in respect of our, let me say, target, the closest one that is in 2030. By the time when we will review our strategic plan, we will review also the target will be even more aggressive than what we have already declared last year. We are not talking only about environment. We are moving to slide seven. We also talk about the social part. Here, in 2024, we were able to have a number of training hours per employee that is 45 hours, up to five hours in respect of the average of last year for nearly 200,000 training hours that we spend on our personnel.
That is, we have already achieved the target of 2030. Again, here, there will be an update in the next strategic plan increasing again this target. You should consider that this has happened during one year, 2024, where the effort in achieving the 2i Rete Gas deal has been significant. We didn't forget about training of our personnel, and the numbers are there to be demonstrated. Pay gap has been reduced significantly. We are fully on track to achieve the objective set for 2030, as well as the woman in management position and as a responsibility role.
We are working hard to achieve the target that are still not so close, but we are very confident that considering the presence in the top management position in Italgas, the female presence reached 44.5%, we will be able also to accomplish with the percentage of 1/3 of women in responsibility role by 2030. Let's take a more close look to the numbers. Let's go to the revenues. We are on page number nine. As I told you, there has been a significant increase of revenues in the Italian and Greek distribution. You know that in 2024, there has been a revision of WACC up, and there has been an increase in terms of RAB that has generated more revenues, as well as deflator and inflation.
I would like to remind you that deflator and inflation, due to the regulatory lag time, it's a contribution that is covering what happened in 2022 and 2023. So we are recovering what we should have got at the time of the high inflation period, 2022, 2023. But because of the regulatory mechanism, we are just getting in 2024. The consolidation of Acqua Campania for 11 months contributed, as you can see, by EUR 82 million. These three elements, so the WACC, the RAB, the deflator, and the inflation, and the Acqua Campania offset the loss of EUR 250 million in terms of revenues fully expected from the end of Superbonus. So year on year, the total revenue remained the same. So the distribution was able, and the water was able to fully offset the end of Superbonus.
If we look at the result side, the cost side, we are continuously reducing our cost. The like-for-like basis resulted in nearly EUR 3 million less. We expect that the algorithm and the work that we are carrying out in our Digital Factory about the use of generative AI or artificial intelligence will continue to bring us a cost reduction on like-for-like basis. The reduction in cost is mainly driven by the end of the Superbonus. So the EUR 200 million that you see is you have to couple with the reduction in revenues on the other side. And then there is an increase of costs brought by Acqua Campania. Again, you have to couple this increase of cost with the revenues that we have shown you before. I will pass now the floor to Gianfranco for the other comments. Please, Gianfranco.
Thank you, Paolo. Moving to slide 10, overall, the evolution of revenues and of the costs led to a 14.1% increase in adjusted EBITDA, which is a record high of EUR 1.35 billion. Moreover, at the high end of our guidance. This is also showing an acceleration in the growth compared to the nine-month trend. This positive performance was driven mainly by gas distribution, both Italy and Greece, as well as some one-off phenomena like the first-time consolidation of Acqua Campania. That all this has fully offset the well-flagged slowdown of the ESCO business that was already in our plan. If we look at the breakdown by business, the great majority of EBITDA is related to the Italian distribution activities, as usual. Greece, on the other side, contributed for almost EUR 130 million, and almost EUR 44 million came from ESCO and water business.
I would say mainly water and, to a lesser extent, energy efficiency. Focusing now on the Adjusted EBITDA on the right side of the slide, the increase was around 21%, reaching EUR 820 million in 2024, better than our guidance of around EUR 80 million. This growth is finally supported by the increase of the EBITDA of EUR 126 million that I have already commented. And for the first time, the EBIT contribution of Acqua Campania for 11 months of almost EUR 16 million. This was partially balanced by the higher D&A for EUR 2.2 million, which is a small increase, mainly related on one side to the carryover impact of the CapEx executed last year, partially offset by the reduction of the D&A due to the end of the Rome concession. Moving now to the following slide, we are now on page 11.
The net profit exceeded EUR 500 million with an increase of more than 15%, driven by solid operating performance with EBITDA of almost EUR 140 million. Net financial charges remained under control, even in a rising rates environment, marking a level of EUR 120 million or EUR 22 million higher than 2023. This increase is mainly due to the full 12-month impact of the bond that we issued last year in June and the new bond that we issued during 2024. The income from equity investment increased by EUR 8 million, thanks also to the contribution by water affiliates Siciliacque and Acqualatina, both equity consolidated. And finally, we accounted for EUR 176 million of adjusted income taxes, marking an increase of approximately EUR 57 million due to a higher taxable income on one side. On the other side, a lower impact of Patent Box compared to the level of 2023.
Tax rate was 24.8% compared to 20.2% recorded in 2023. Now, slide 12 is just the recap of the profit and loss with all the elements that we have already discussed. So I will skip it, and I will drive you to the following one, slide 13, in which you find the detail of the impacts of the adjustment and the reconciliation with the reported P&L figures. As you can see, we reported approximately EUR 38.5 million of adjustment revenues in the EBIT and EBITDA lines, with a tax effect of EUR 10.8 million of these items. Let me comment briefly on each of them.
The first EUR 9.9 million negative impact is something that you already know because it was already reported in our first-half results, and this is referring to Resolution 207 on ARERA regarding a recapture for a previous period, 2011-2016, of the cost of telemetering already recognized and then recaptured. For this reason, being related to a different period of time, we have put this item into the adjustment. The second is something new. It's related to EUR 24 million negative impact for the cancellation of safety bonus of the gas distribution business, also in this case related to a previous year, the year 2020. This explains the fact that it is in the adjustment line, and the last one is a EUR 4.6 million negative impact of Resolution 704 concerning part of the remuneration of the concession started after 2018.
Let me add that we disagreed with all the above resolution, and we have taken action to assert and confirm our rights. Now, moving to slide 14 for the evolution of the cash flow. This is a very important takeaway of this year, the fact that the level of the cash flow from operations was above 1 billion, almost two times the level reached in 2023. To explain this, you will remember that last year was deeply impacted by some specific phenomena on working capital linked to the Superbonus tax receivable. This year, at the opposite, we saw we have a progressive normalization of the working capital, reflecting mainly the positive contribution of Superbonus tax credit, offsetting the tax payment due for the year.
As a result, cash flow from operation has been allocated to cover 100% of net CapEx, around EUR 780 million, 100% of financial investment and other for EUR 103 million. The majority of the dividend payment of EUR 285 million occurred in second quarter. All in all, this resulted in an increased net debt of around EUR 128 million, which is in line with the guidance that we gave, except for some rounding matters. If you look at slide 15, you can see the usual recap on our financial structure. The net debt at the end of the year came in at EUR 6.76 billion for the reason explained in the previous slide. As a result, the leverage was below 63% at the end of the year, thanks mainly to the solid cash flow from operation and also to the positive RAB evolution, reaching EUR 10 billion at the end of 2024.
We are benefiting from a well-spread maturity profile, healthy level of liquidity. We had, at the end of the year, EUR 400 million of cash, and this excludes any effect deriving from the acquisition of 2i Rete Gas, of the prospective acquisition, of course. Let me quickly recap the transaction that we have completed during 2024, a new bond of EUR 650 million issued in February with a coupon of 3.18%, and the tap issued the same bond that we carried in September for an additional EUR 350 million, the same condition, reaching the rounded amount of EUR 1 billion. We also concluded the repayment of the residual amount of the bond for EUR 380 million, expiring in March 2024, and of two bank loans for EUR 500 million, in addition to the signing of a new EUR 600 million sustainability-linked revolving credit facility.
Notwithstanding all these transactions occurring in the period, we managed to keep the average cash cost of debt just above last year, in fact, 1.6%. Finally, the current composition of our debt remains substantially well balanced with 85% fixed rate and the remaining floating. Now, I leave the floor to Paolo for his final remarks.
Final remarks is very easy. It's to show you the progression of the dividends and the policy that we have applied. If you look, I was just looking while Gianfranco was talking that if we look about the last dividend that was paid in 2016 when the group was still in the Snam group, we doubled the dividends. I think that is the most outstanding result that I would like just to underline. So EUR 0.406 is an increase of 15% compared to last year. It's two times what we paid at the beginning of our incredible journey. I will leave the floor for Q&A. Thank you.
Excuse me, this is a Chorus 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 the touch-tone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. Once again, that's star and one for questions. The first question is from Gianfranco from BofA. Please go ahead.
My questions. The first one I had is it looks like in Q4, the tax expense seems to have benefited from the Patent Box, which you flagged very well. A number of questions I have, in particular, will that be a recurring feature in 2025 and beyond? I would also be interested to know, secondly, if you have any sort of updates on your consultations with ARERA or anybody else for the RAB deflator because of the changes there. A third question I had was perhaps when can we expect concrete earnings guidance for 2025? I appreciate, of course, as the well-flagged EUR 1 billion rights issue still to digest. Thank you.
Yeah, on the Patent Box, unfortunately, this is the last year of this benefit that is referring to a previous year, to the year 2021. So we have completed the period covered by this, let's say, this benefit. And as you have correctly noted, the amount being referred to one year is less than the amount of 2023 that was the sum of the previous four years. On the deflator and the consultation with ARERA, consultation is in progress, not only by us, but all the system of the other operators. We do not have visibility on the, let's say, issuing of the final decision. The only fact that we can say, because it's public, is that the provisional tariffs 25 are based on the level of deflator for the RAB ending 2024 of 0.3%.
Apart from that, we will expect maybe in the first semester some confirmation, but we do not have visibility on the date. Regarding the last question about guidance for 2025, as you know, when we publish our calendar events, we indicated that our strategic plan is going to be presented, the new one, the update in September, October. So we will issue the guidance when we will present the first quarter result. So normally, if you remember, normally we give the guidance at the time of the strategic plan, but because this time the strategic plan is going to be in October, we will issue the guidance at the time of the first quarter result. And I think that's it. Okay.
Next. Thank you.
The next question is from Javier Suarez from Mediobanca. Please go ahead.
Thank you for the presentation. Several questions. The first one is on the timing for the completion of the 2i Rete Gas deal. If you can confirm that the latest guidance that we have, that probably is conclusion before summer, is still valid. And if you can share with us your latest expectations on when we should have the paper from the competition authority on the disposal that should be part of the deal as well. So that question of the timing would be the first question. The second question is on the operations. I'm interested in you can elaborate on the process where you are in the extraction of synergies and putting these subsidiaries at the Italgas standard, both in Greece and also on the water subsidiary. On the waters, it seems that the result has been better.
I wanted you to elaborate on reasons behind and also where, again, we are on the Greek activities. And the last question is on the page number 22 of your press release. You are announcing that Italgas has appealed in front of the Regional Court of Lombardy at the Resolution 513 that is fixing the allowed return on RAB for gas distribution at 5.9%. So the question is if you can elaborate on the reasons behind what you are arguing and the timing for these hearings at the Regional Court of Lombardy. Thank you.
You passed by far the three questions. You made so many. Okay. Let's try to go one by one. The 2i Rete Gas timing, I mean, there is no news on that. I mean, you know that the antitrust authority has 90 days after they published the document last December, and these 90 days will end by, if I remember well, 17th of March. You should also know that they may have an additional 30 days in case they need to have an additional 30 days. But hopefully, they will not use these additional 30 days. So the timeframe that we envisage is always the same. We didn't change, and there is no additional news or information for which we are going to change our time schedule. Closing should happen.
If you imagine that we should receive a final notification by the antitrust, let's say by mid-March. It should happen by, let me say, end of March. The closing beginning of April. There is a clear timeframe between the antitrust notification and the closing, and then the increased capital will happen. I mean, our plan today is before the summer, inside the Q2, as long as the market conditions are good, so nothing has changed since then. Regarding the operations, I mean, regarding Greece operation, they are doing better than last year, and in fact, I mentioned that in the presentation that the increase in revenues and increase in EBITDA are driven by gas distribution in Italy and Greece.
There is a clear alignment of the performance of the Greek operation to the Italian operation following the trajectory that, if you remember, not last year, but the year before, we showed to you in the strategic plan saying, "We will bring in two, three, four-year maximum, the Greek operation with the same marginality that we have in Italy, and we are exactly online." That's the reason of the good result of 2024. On the water side, we are working with the companies that we have acquired, no matter if they are consolidated or not. You know that Acqua Campania is consolidated, but Siciliacque and Acqualatina are not consolidated, but we don't care about the consolidation. We care about the operation.
We are working very hard in Sicily to address and to, let me say, to fix the problem of the water scarcity also for the coming years. In Acqualatina, we are working hard to introduce new technology and innovation to reduce the water leakage, and we are moving in that direction and to be more efficient. Results in the water sector are, of course, limited up to now. We have just less than one year of working with them. But we are moving in the right direction. And then finally, the fact that we appeal with the determination of the regulator about the new WACC is because we didn't agree, or better, we didn't agree. We didn't find in the resolution of the regulator a solid argument about the revision of beta that is relevant only to gas distribution.
If we would found a solid agreement, we would not appeal the determination of the regulator. But we didn't find a strong argument about why the beta of the gas distribution should be lower in respect of the previous one.
Next question, please. The next question is from David Fernandez from Barclays. Please go ahead.
Yeah, good afternoon. Thanks for the presentation. Just two very quick questions. In slide number 10, a clarification, you show the change in EBITDA, and you say there is an impact from the end of Rome concession. Can you identify how much is the impact of the end of the Rome concession in EBITDA? And the second one is, I know it's a little bit early, but if you have any view on where are we heading in terms of allowed return for 2026, given that the mark-to-market was giving 30 basis points cut. But for example, some of your colleagues kept the guidance flat for allowed WACC in 2026. Thank you very much.
Yes. On the point of the D&A and Rome concession, the concession expired last November. The impact that we have in the last quarter is in the region of EUR 15 million less due to the expiry of the concession. This explains why I think the underlying of your question is a very low increase in the D&A compared to the level of CapEx that is similar to last year. This is the reason why.
Thank you.
On the second, on the WACC 2026, we have already started 2024 only, so 2025 only. Let me say that I'm always skeptical about the mark-to-market, and if I look where we are today, we've accrued four months of observation out of the full year, so 12 months, so we are only 1/3 of the journey, so I don't have the answer, so if you like the mark-to-market, buy the mark-to-market. I don't like the mark-to-market because they are always negative, so there is always some pessimism in the mark-to-market view, so if you like it, buy it. I don't like it, I don't buy it. Thanks.
Thank you. Very clear.
Next question, please. The next question is from Emanuele Oggioni from Kepler Cheuvreux. Please go ahead.
Good evening, and thank you for taking my question on the presentation. I have two questions left. One is on the Rome concession, but the question is not about D&A, but about the visibility related to the new tenders for Rome. And in general, the next few gas tenders in Italy, you are going to attend in 2025. Second question is on the ARERA consultation document, sorry, number 427. I think this could be a positive catalyst for you. You could gain a positive one-off on that. I would check with you your expectation and the timing on the outcome on this consultation document. Thank you.
I will put together the first question and the second one. On the tenders, Rome concession, we don't think that it's going to happen this year, the tender, because we don't have any evidence about this movement. I think we should have this year in 2025, three maximum four tenders that may happen. That is what has been announced by, let me say, four municipalities. But then, as you are used to, we may see some postponement during the year. So as of today, we have four tenders that are going to happen in Italy in 2025 based on the announcement. I don't think more is going to happen. No. There are probabilities that some of them may be eventually further delayed.
Regarding the consultation document about the OpEx that you have mentioned, it should be I mean, the final outcome should happen during the first quarter, hopefully by the end of March. As we have already anticipated, the impact on us is around EUR 50 million. If we look about the 2i Rete G as is about another EUR 30 million.
Thank you.
Once again, if you wish, just a question, please, press star one on your telephone. The management, there are no more questions registered at this time.
Thank you. Thank you very much. If anyone has any follow-up questions, the IR team is available. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.