Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the Italgas First Quarter 2023 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 Ms. Anna Maria Scaglia, Head of Investor Relations of Italgas. Please go ahead, ma'am.
Hi. Good afternoon, ladies and gentlemen, and thank you for joining us. Today, we will walk you through Italgas first quarter 2023 results. I'm Anna Maria Scaglia, Head of IR team, joined by Mr. Paolo Gallo, our CEO, and Mr. Gianfranco Amoroso, our CFO. We will address any question you might have at the end of the presentation. I leave now the floor to our CEO, Mr. Gallo.
Thank you, Anna Maria. Good afternoon to everybody. I move to slide two, starting the comments on our first quarter result. As you can see from the slide, we have achieved an impressive growth in the quarter with double digit increase regarding all key operating income drivers. Adjusted revenues were up more than 35% led by the strong growth of the energy efficiency company. In addition, the consolidation of DEPA, the Greek DSOs, proving the benefit of the diversification action that we put in place in the last few years. In the Italian distribution business, the main drivers were the rapid growth and the positive impact of inflations that were partially offset by the dilution from the disposal of the Naples, the item that we lost last year.
While OpEx were up year-on-year, this is not surprising considering the development of the energy efficiency activity and the Greece activity. For the rest of the business, costs remain under control, notwithstanding the inflation impact. Overall, considering our cost of debt, our adjusted net income grew by more than 16% in the quarter. If we move to the following slide, page number three, we can take a look at the investment we made during the quarter. CapEx were around EUR 175 million, slightly below last year, but with a different mix. We can see a significant impact about working capital. It's a negative impact. The main drivers were the impact of the energy efficiency company growth and the VAT that was linked to the Bonus Gas payment.
Gianfranco will explain later in more details. On top of the escrow and the VAT, billing seasonality was also less pronounced than in previous year due to the milder weather. As a result of the cash flow evolution, as you can see, net debt increased by nearly EUR 90 million, just above EUR 6 billion, if we exclude the impact of the IFRS 16. Going forward, take a look at the CapEx components. Out of the EUR 175 million, EUR 25 million are relevant to Greece. Regarding Greece is mainly extension of the or extension slash building of new network. As you can see, there is a significant increase in digitization if we compare the amount investment invested in 2022. The amount invested in 2023 in comparison with the first quarter of 2022.
Development and repurposing attracted the majority of the CapEx, around EUR 84 million. The number includes also EUR 4 million of relevant to Sardinia. Overall, Greece and Italy, we added more than 200 kilometers of new pipes in both countries. If we now move into the results, ESG results, we start from the energy consumption. Let me make comment, first of all, that those data includes the numbers coming from Greece, so the perimeter is not the same as it was in 2022. Nevertheless, the net energy consumption dropped by more than 15%. If we take out the Greek part, the consumption dropped even further by more than 20%.
Main contribution came from industrial gas consumption, which was almost 23 terajoule lower, thanks to the all the action we put in place, we have already explained some of them last year, to improve the performance of our operating system. This is one of the core action implemented that has not been concluded yet. To reach our long term goal that we have announced in June about the energy consumption, in other way, the energy efficiency. Electricity consumption was lower, as you can see, mainly driven by the lower consumption of the activity that we've put in place regarding our activity in the Italgas Acqua, so water distribution and building management, but mainly water distribution. As I said, Greece has been included, and that's the reason why vehicles represent the only part of the energy consumption that is higher than last year.
In other terms, the efficiency that we've achieved in Italy, we're not able to fully compensate, offset the additional contribution coming from Greece. The reduction in efficiency is remarkable. Similar situation, I'm on the following page. Similar situation is relevant to CO2 emissions. Here there is a difference in perimeter between first quarter 2022 and first quarter 2023 that is represented by the Greek activities. We reduced our overall emission by more than 6%. Without Greece, it would have been around 12%. The decrease is mainly driven by the fact that we have adopted a different approach regarding civil and industrial gas consumption, as we just described before.
If we look at the main component about CO2 emission, that is the leakages, in the first quarter, we continue setting more stringent targets regarding localization in term of time of the leakages and in time again in term of removal of such leakages. While we increase materially the km of network inspected, in fact, we inspected in the first quarter 24% more in kilometers, bringing the overall kilometers inspected more than 25,000 km, out of which nearly 1,000 km are relevant to Greece. We have started already in Greece to deploy our technology, the Picarro technology, to research, find and fix the leakages. Thanks to the result achieved, the gas leakage per kilometer survey dropped by around 22% to 35 standard cubic meter per kilometer. We are. Stay on the previous page, please.
We are, and I would probably say, we are the only DSO in the European Union well prepared to adopt the new methane emission regulation that will probably be released by year end, in which there are a requirement that far more stringent in term of number of times per year you are requested to inspect your own network. We are the only one that are doing more than once per year. All other DSO are doing far less frequency inspection. Now, let's go on the economic results. Total revenues, we have already seen increase by EUR 126 million, led by Greece operation and Energy Efficiency operation. I will explain in the next slide. Overall expenses increased by EUR 79 million, driven by the same main drivers, Greece and energy efficiency. D&A was up by EUR 17 million, mainly due to higher CapEx that we.
The increase of RAB deriving from the higher CapEx that we invested last year and the DEPA contribution. Tax rate more or less is in range in the line of what we explained, but Gianfranco will give you more details later. The net profit shown a very robust increase by more than 16.5% year-over-year. If we go more in details about the revenue, we can look at that, the distribution in Italy growth in RAB nearly achieved more than EUR 8 million higher revenues. EUR 6 million are coming from inflation or RAB, so the deflator and the inflation on the OpEx.
While we can see the disposal are relevant to the Naples concession and Gaxa, they represent in term of revenue, and we will see also in term of EBITDA, they represent in term of revenue minus nearly 20%, EUR 20 million, EUR 19 million. The contribution of DEPA has been positive by EUR 44 million. The main contribution is coming from Geoside with an additional value of EUR 88 million in the quarter. You can see the same same numbers in the following one, the same numbers line by line, where there are distribution and the different tariff contribution for meter re-replacement, other distribution revenues compare quarter-over-quarter. Other revenues, here, they represent mainly the ESCo, the difference. You have the contribution that we have already commented about the infrastructure.
If we take a look at the cost, we have a free, as you know, we represent like for like basis. Like for like increased by EUR 3.4 million. Out of these EUR 3.4 million, EUR 1.8 million are related to cost that has been reflected also in the revenues. Therefore, we have a close to zero impact on the EBITDA. Which kind of cost they are? They are cost that we bear regarding gas trucks in Sardinia and the cost of meters that we sold to a subsidiary in the central part of Italy. If we take out these effect, we still have an increase of about EUR 1.6 million. One of the driver, as you can expect, is the higher utility cost.
I should recall you that last year, until September, we were enjoying a very low cost of the gas, thanks to a two-year contract that we signed with a very low price. Let me make a comment. Inflation impact is everywhere in our cost, but the impact in term of percentage is extremely limited, at least for the time being. That means that we were able to control the cost and nearly absorb all the inflation impact, including the increase of the cost of personnel, following the agreement that we reached last year with the trade unions. As you can see, there is also a reduction of cost due to the disposal that is relevant to the Naples, and Gaxa.
There is the contribution of DEPA, the cost of DEPA Infrastructure, and the major block is the increase of the cost for our energy efficiency company, around EUR 70 million. I would like to remind you that if you compare the let me say profit and loss up to the EBITDA of our energy efficiency company, we have reached a higher margin in term of EBITDA in respect of last year. We are at 19% in term of margin. If you want to take a look at the cost from a different perspective, you have the table in page 11, where we have allocated the cost relevant to the distribution activities in Italy.
The other activities, mainly energy efficiency company and water distribution, you have a mix of other costs, like other costs, energy efficiency certificate and concession fee, and finally, the DEPA Infrastructure. Our EBITDA has show a very significant, very robust growth of nearly 19%, where there is a clear contribution coming from the energy efficiency company and the DEPA Infrastructure. Somebody may notice that the, let me say, what we call Italgas distribution show very little increase in term of EBITDA. It's a remarkable result, considering that we lost Naples, and Naples represent nearly EUR 11 million of EBITDA. We were able to completely offset such a loss and be able to gain a little bit in respect of last year.
The increase of EBITDA, if we consider a similar perimeter, has been more than EUR 11 million. A remarkable results. The other element that I would like to comment, that is the first time that we show a chart like that, is that while last year Italgas distribution represented 99% of the total, ESCo was a few million in term of EBITDA, if I remember well, EUR 3.5 million. This year, Italgas distribution represent 83% of the total, and then the remaining 17 is split between energy efficiency contribution and DEPA contribution. As a result of this certification effort that we put in place in the last couple of years, and as a result, a significant numbers coming from the energy efficiency company and the Greek operations.
I will now let the floor to Gianfranco that will continue the presentation. Thank you.
Thank you, Paolo. Coming to the EBIT on page 13. It reached in the first quarter, EUR 172 million, with an increase of around 22%. This is a result of an increase in EBITDA of our [Italian meter] of more than EUR 17 million, as a result of the variance of revenues and OpEx that Paolo already explained. We have EUR 8 million of higher D&A that are mainly related to the CapEx executed in the last 12 months. Finally, DEPA incremental EBIT contribution of EUR 21 million. Please note that the EBITDA contribution of DEPA in the period has been around EUR 30 million. Moving now to page 14. At our adjusted net profit after minorities reached EUR 104 million with an increase of 16.5%.
Is it remarkable that net adjusted financial expenses mark the level of almost EUR 20 million, EUR 5.9 million higher than last year's same period, mainly due to the impact of the rising short-term interest rates on the floating rate portion of our debt. Contribution from associates was almost unchanged. We accounted for EUR 41 million of income taxes, marking increase of approximately EUR 7 million due to a higher taxable income. Tax rate was 26.9%, well in line with the level of last year. Looking at the evolution of the cash flow on page 15. You can see that the cash flow from operation was around EUR 107 million. Quite a low position if compared to what is the usual level of cash flow in this period of the year.
This is a consequence of a negative evolution of net working capital that brought a negative contribution of almost EUR 160 million. Out of this cash outflow, around EUR 100 million are explained by an higher VAT receivables correlated to the Bonus Gas and other similar measures put in place to support the value chain. Other working capital uses were Superbonus and Ecobonus receivables for more than EUR 100 million, linked to the significant growth of our ESCo activity in this quarter. On top of that, we reported a lower cash contribution by the billing seasonality, only EUR 20 million, if compared to last year's same quarter. This is due to mild weather and to structural saving behavior, so the final users. We also booked around EUR 70 million of positive evolution on the payables in the quarter, mainly for Geoside and tax payables.
After that, net CapEx generated a cash outflow of almost EUR 197 million. All this resulting in a debt increase of approximately EUR 90 million. Let me now make an update of our debt structure at the end of March, as represented on page 16. First, let me recap the main debt transaction of 2022. A new ESG loan, EUR 250 million floating rate, a new EIB loan, EUR 150 million fixed rate, and the new multi-tranches facilities package with DEPA as a borrower, floating rate. The last two deals were executed in December, replacing short-term uncommitted banking lines and securing a long-term tenor. Liquidity provide us with an adequate buffer to cover short-term maturities. Looking forward, we do not have any major refinancing needs this year, considering that the first bond repayment is due for March 24th.
Looking finally at the cost of debt, the rise in the short term market rate explain the increase close to 1.3%, since the majority of the banking facility has been drawn or rolled over towards the end of the year, as I have explained before. The current composition of our indebtedness is almost unchanged, 91% fixed and 9% floating. Finally, moving to the balance sheet on page 17. Just to comment that the net invested capital amounts to almost EUR 8.6 billion, with an increase of almost EUR 200 million compared to year-end 2022, mainly related to the incremental CapEx and working capital that we have commented. On the liability side, consolidated net debt was just above EUR 6 billion or EUR 6.09 billion, including the IFRS 16 impact of approximately EUR 72 million.
I leave now the floor back to Paolo.
Thank you, Gianfranco. Let me close this presentation with few remarks before opening the floor for questions. If you look at the difference element, you can see that there has been an outstanding quarter for Italgas. You can start seeing the significant contribution of our diversification, and that is mainly driven by Greece and the energy efficiency company. Even though we have registered a significant reduction in the EBITDA, as I was explaining before by the fact that Naples was given away, was lost. We were able to completely offset such reduction in EBITDA and still increasing thanks to the other activities. If we look at the ESG performance, really are also impressive, considering that the perimeter has been enlarged by the Greek operation.
That is thanks to all the action that we put in place in 2022. Finally, I will remind you that we are in an exclusive negotiation [audio distortion] active in the water sector, we should submit a final bidding offer before the end of the exclusivity period. And as a final comment, we will have our strategic plan presentation in June 14th in London and we are expecting you to come and visit us. We will give you more details while we were, of course, in the days to come. And at that time as usual, we will disclose also our 2023 guidance. So please don't raise any questions about the guidance because the answer is already here. I will leave the floor to Q&A.
Thank you. This is the Chorus Call conference operator. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. To remove yourself from the question queue, please press star two. Please pick up the receiver when asking questions. Anyone who has a question may press star one at this time. The first question is from Javier Suarez with Mediobanca. Please go ahead.
Hi, thank you for the presentation. Three questions. The first one is on the level of digital transformation for the gas distribution network in Italy. I think that in the later conference call, you mentioned that the target was to complete that process by 2024. If you can give us an update on that, the evolution of that process of completion in full digital transformation of the network. A related question to that is on a comment on DEPA, and I'm particularly interested on the opportunity for operational improvement that you see there for our subsidiary that has been consolidated for two quarters now.
Also related to DEPA, you can give us an update on the regulatory discussion with the regulator there on the allowance on the asset base expected for this year. The third question, the second and third question are related to the evolution of your energy efficiency activity. We have seen some increase in working capital absorption that seems structural. The question here would be, which is the level that the year end that you think is correct to assume in terms of working capital absorption as a consequence of the structural growth on the energy efficiency activity? Do you think that this working capital absorption is something structural for Italgas in the medium term?
The very first question is on the water distribution activity. It is public that you are in negotiations for the acquisition of several subsidiaries there in Italy, that activity. The question for you is that if you see that as something opportunistic or part of an strategical switch to compensate the low development in the gas distribution option. Thank you.
First of all, you have raised five questions, not three. Just to make it clear that you hide some of the question one after the other. Now thank you, Javier, for the question. I will respond to all of five. First one, quite easy to respond. You have also, on the CapEx side, you have also seen an increase of the CapEx investment on the digital side. That is the signal of acceleration of our digital transformation. By the end of this year, we should have digitized more than 80% of our network. By 2024, we should complete it. What does it mean?
By next year, all of our network will be in our system, the system called DANA, for which we can remotely control, remotely give instruction to the network in a completely different way in respect to the past. We have already moved, for example, all the network existing in Sardinia is already sitting on DANA. It is fully controlled and remotely instructed by our Torino center that covering the all Sardinia activities. We are moving week after week a portion of the network that is completely digitized into the DANA. As I told you, by this year end, we should be at 80%. You ask a couple of question about DEPA. DEPA, we are starting significantly to let me say, try to increase our operational efficiency.
We have a plan that should be completed by year-end, again, to merge the three DSO in one single DSO. That, you can understand, is going to be a significantly efficiency in a sense that you don't have to replicate 3x the same function that today we have. We will have just one single function covering the DSO. We will keep the DEPA Infrastructure. We are going to change the name also during the year, that we are going to keep the DEPA Infrastructure as a holding for the time being, and then the three DSO will be merging one single one. We should detect significant saving, not... And efficiency, not this year, but starting from 2024. Regarding the WACC, there are current discussion with the regulator.
As you know, the Greek government has recently released a new law under which the regulator is allowed to issue a WACC limited for 2023 instead of covering the full, the four years. And of course to be reviewed later on. That, for us, is extremely important because setting a WACC for four years, it's a risk in a sense that we know which is the inflation and interest rate today. We don't know what is going to happen in the next three years. So we prefer this approach to have a WACC that is for 2023 and reviewed later on. Similar to what is happening in Italy, if you want.
Less mechanistic, but of course, again, issuing the same kind of concern that we may have considering the high volatility regarding inflation rate and interest rate. Regarding the ESCo working capital, you know, that has been driven by the fact that there has been a completely stop in term of selling the fiscal credit. Hopefully, by I would probably say before end of June, if not in the second half of 2023, we should be able to sell some of our credits. We should be able to reduce the working capital impact. Your question is going to be, let me say, part of our structure of this working capital, the answer is no. It's going to be reduced significantly.
We are going to already offset before June around EUR 40 million. That is our fiscal credit. That is will help us to reduce the working capital increase. To say that the water, the diversification in the water is opportunistic, that is not true. We have been talking about the water, entering into the water industry since more than two years, probably three years. If you go back to our strategic plan, you will probably see two years ago we presented maybe the first idea to enter into the water distribution into the water industry. We feel it is, it's very similar to our core business, probably easier from a certain point of view.
We feel that our technology, that's if we bring our technology into the water industry, we should see an incredible upward in term of reduction of leakages as starting. Our ability to invest, I mean we have demonstrated over the years, Sardinia is a clear demonstration what we can do. Applying to the water industry, I mean, we will probably do a very, very good job. We will let the country to really use, in the proper way, all the funds that has been allocated under the Resilience and Recovery Plan allocated to the water industry. I think I responded to all your five questions.
Next question, please.
The next question is from Mark Freshney with Credit Suisse. Please go ahead.
Hello. Thank you for taking my questions. Firstly, in terms of balance sheet capacity, if opportunities present themselves, how much balance sheet capacity would you, or debt headroom would you have to explore potential options if and when they come up? Just secondly, on the inflation rates on your asset bases and your OpEx, which are similar, right, over the long term, how is your true underlying inflation rate of your cost base comparing to that? Can we assume that you're able, through digitization, to take out costs and offset that outperform, essentially, the general rate of inflation with efficiencies? Thank you.
Let me start with the second one. It is probably easier to tell you. The other one is more general. The inflation recognized by the regulator on the first quarter has been, let me say, is not 4% but [3.98%] so 4%. What does it mean? That the regulator has recognized to us that based on the rules, an increase of the OpEx recognition, about 4%, reduced by the X-factor of 3.53%. Mainly, for the first time, we have seen an increase, even small, of the revenues of the OpEx. On the other side, as I told you, as of today, the inflation is more or less everywhere. We've been able to really reduce it.
One example that I wanted to bring to you is that we have agreed with our trade unions an increase of 3% on the average wages for 2023.