Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Italgas First Half 2026 Results. 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 Miss Anna Maria Scaglia, Head of IR of Italgas. Please go ahead, madam.
Hi. Good afternoon, everyone. It's Anna Maria here. I'm here with our CEO, Paolo Gallo, and our CFO, Pierre La Tour, and they will run through the presentation today. As usual, there will be the Q&A at the end of the presentation. I leave now the floor to our CEO, Paolo Gallo.
Good afternoon. It's great to be back here just one month after we launched and we delivered the new strategic plan 2026/2032. I am pleased to say that we are fully on track on what we are going to deliver in the coming years. Let me start with the major achievement we reach in our first semester, 2026. First, we continue to deliver solid double-digit growth that is driven by organic growth, perimeter change, 2i Rete Gas enlargement, and the benefit arising from the cost synergies linked to the integration of 2i Rete Gas. As you can see, synergies, you can see in the numbers. Synergies and efficiency continues to progress steadily and rapidly. We have already achieved 42% of the 2032 target. The 2032 target is the latest we announced in our strategic plan, it's EUR 280 million.
Honestly, it has been achieved just one year and a quarter since the integration of 2i Rete Gas into Italgas, since the acquisition of 2i Rete Gas and one year since the integration of 2i Rete Gas into Italgas rating. Regarding the tender, for the first time, we are going to give you a detailed number. I'm not going to disclose anything. It will be in a couple of pages. Honestly, what we have announced in our strategic plan but one month ago, is becoming more solid than even one month ago. I will get into detail in a moment. Finally, we have received an outlook upgrade by Moody's that based on the strategic plan opening for potential, not outlook upgrade, but a potential upgrade in our rating. All of that is extremely positive, I wanted to guide you into our numbers in details.
Let me move to the summary of the results. As we anticipated, we have delivered double-digit growth in all the KPIs. Even more important, with a strong operating cash flow. We nearly reached EUR 1 billion of cash flow operation. Before starting, I think it's worth reminding that the 2i Rete Gas acquisition was completed on April 1st. Therefore, the comparison between the first half of 2026 with the first half of 2025 is not homogeneous because in 2026, we have the full six months, while in the first half of 2025, we had only the second quarter. Let me start from the top. Adjusted revenue were up 17.5% versus the previous year, and this was driven by organic growth in the Italian gas distribution and the first time consolidation of 2i Rete Gas in the first quarter. Profitability grew even bigger by 25%. We passed EUR 1 billion.
It's EUR 1,072, with an EBITDA margin that reached 81%. That is a clear evidence of the synergy and the efficiency that were delivered during the six months. As we move down, adjusted net profit grew more than 27% as a result of our financial management, despite the impact of the temporary IRAP tax increase. The other record that we achieve is relevant to the technical investment. We really reach EUR 800 million, 55% year-on-year basis. That is driven mainly by the upgrade and digitization of 2i Rete Gas legacy network that is consistent with the allocation priority we outline in our strategic plan. As I already anticipating, the operating cash flow is another record, EUR 930 million, that cover all of our CapEx and part of dividend, while the disposal that you remember very well were compulsory by the antitrust, contributed to further reducing our leverage.
In fact, the net financial debt is slightly lower than what we recorded at the end of 2025. If we move on and we'll take a look at the synergies, I think that it's an incredible progress that we have made. We are talking about only 12 months after the integration of 2i Rete Gas and only 15 months since the closing. We have already achieved 42% of the overall target of the EUR 280 million that we just announced in June. That's an incredible pace, and it really give us the real confidence about what is in front of us. Let me just go through very quickly about what we have already done and what we are doing right now and what we are going to do in the coming months and years.
As of today, we have done a lot of working in sourcing of core activity, IT system consolidation, review and streamlining our territorial and headquarter organization, and rationalization of our car fleets, offices, and contract. On the new initiative ongoing, I think it's worth spending a few words on the incredible speed at which we are developing at scale our AI, in particular Agentic AI models and application, implementing into our daily operation, both on the field, but as well as the back office. We are talking about field works scheduling, IT service, claims and contact center, network optimization. That just the beginning. It's the beginning of an incredible journey, and I'm sure you will be surprised by the incredible amount of value we will be able to create and deliver through AI combined with our unique digitized infrastructure.
The new chart that we are going to show, we are on page five. This is the first time that we are going to show such a detailed chart, is about the tender. The positive tender momentum continues. We discuss it during the strategic plan presentation and also through the one by one or the group meeting we had in the road show we made in Europe and U.S. While during these meetings, as well in strategic plan, there were some skepticism about the tenders to become real. Let me show now numbers that shows that we were right, that the signal that we get from the field were consistent.
As of today, you can see that in the period 2020-first half of 2026, 11 items have been awarded to Italgas, two have been awarded to a third party, and additional two have been awarded, but after court appeal. We are talking about 15 since 2020, so limited number in a long period of time. If we are looking about the next 12 months, the second half of 2026 and the first half of 2027, we have 19 tenders coming to the market. Two of them are waiting for a final awards. Three are tenders bid submitted for which we will see probably before the end of the year, the final awards. We are going to see that the pipeline is growing.
We have another eight items for which the offer should be submitted by end of 2026, and additional six for which we expect that the offers to be submitted in the first half of 2027. As you can see, it's a significant number. We are not talking about hope or about, let me say, good faith. We are talking about facts. In fact, if you look about the top part of the chart, when we are talking about the two items to be awarded, the three and the eight, for which we are talking about 13 items, we are talking about EUR 400 million of additional RAB opportunity. Additional RAB means on top of the amount of asset that we already own in those item. Let's move to some more numbers, some more details about financial performance.
As we anticipated, revenues grow nearly 18%, 15.5% in respect of the first year. You can see which is the contribution of 2i Rete Gas, but you all can also see the contribution coming from the organic growth of the regulated gas distribution. The fact that we invested last year, now we are see the result. The negative part of the revenue is the one linked to the network and the redelivery point that we were obliged to disposed. The negative contribution is EUR 2.6 million. Finally, what we have already anticipated in the first quarter is the reduction in revenues, especially in the energy efficiency that you will see will be reflected also in reduction of cost. If we talk about cost, that is probably the most amazing chart of this presentation.
If we compare the cost of 2025, you can see that the effect of 2i Rete Gas, the fact that there is a difference of quarter between 2025 and 2026, is EUR 91 million. At the same time, in the first six months, we were able to save nearly the same amount, EUR 82.2 million. We were able to make equal to zero the 2i Rete Gas effect. There is another reduction of cost driven by the reduction of revenues that I already talked about. That is the energy efficiency. Let me just go back to the EUR 82 million. That represents a 22.8% cost reduction that is coming from the synergies for which I am going to talk about in a moment. I think that is really an outstanding result that we reached in the first six months of 2026.
If I translate this number into the margin, the 2026 EBITDA that passed EUR 1 billion, increased by 25% in respect of last year, with gas distribution, Italy and Greece contributed to the vast majority of these results. The Italian gas distribution is the main growth engine, supported by the fact that we have consolidated in full six months 2i Rete Gas. Of course, the synergies are the other big boost in increasing the EBITDA. Let me underline the fact that the EBITDA margin reached 81% of the revenue. That is a number that we have never achieved in the history of Italgas. Now, Pierre La Tour will give us more details about the other part of the financial result. Please, Pierre.
Thank you, Paolo. On page eight, we show the adjusted EBIT bridge. As you can see, adjusted EBIT exceeded EUR 700 million, up almost 27%. This increase was largely driven by the EBITDA increase, which was partially offset by higher D&A of EUR 67 million. The increase of D&A mainly stemmed from the consolidation of 2i Rete Gas and the carryover effect of the investments that were carried out in the previous 12 months. If we move on to page 11, here we have the adjusted net profit bridge. Adjusted net profit after minorities reached EUR 398.6 million, with an increase of 27.3% versus last year. This was mainly driven by 2i Rete Gas acquisition contribution, as well as by the solid operating performance.
The higher EBIT contribution for EUR 147.5 million was partially offset by, firstly, an increase of adjusted net financial expenses that now include the cost of 2i Rete Gas consolidated debt for six months and the interest charges related to the full quarterly impact of the dual tranche bond issue that was carried out in March 2025, as well as the bond that was issued back in April 2026. This drives a higher cost of debt. We currently have a cost of debt that stands at just below 2.1%, and this compares to the 1.95% that we had in the first half of 2025. Moving on, a EUR 2 million higher contribution from equity investments. Finally, a higher adjusted taxes of EUR 38 million.
This increase is due to a higher taxable income and a higher tax rate of 28.6%, which compares to 28% in the first half of 2025. The increase in tax rate is mainly linked to the temporary IRAP tax increase, as well as lower incentives compared to 2025, which were partially offset by the recovery of prior year's foreign tax losses.
I'm taking back the call because I would like to comment the other performance we made, this month about the technical investment. Nearly EUR 800 million invested in six months only, with an increase of 55% compared to the previous year, driven by, of course, the increased perimeter at 2i Rete Gas, but even more important, the ramp-up of the digitization upgrade of the network that we inherited from 2i Rete Gas. In fact, you can see that all the area of investment are growing. We reach in development and repurposing activity EUR 442 million. Even more important, the digitization jumped from a little bit more than EUR 100 last year to EUR 171, up 61%, because that is what we spend to support the transformation and the modernization of the 2i Rete Gas network.
We have also now the jump in the ICT and real estate that explain the difference. During the period, I'm going back to the other in a moment, but during the period, we laid 650 km of new network, a 50% increase compared to last year, and nearly 40% of that, has been done in Greece. That continues to contribute to our result, financially and technical. Let me spend a little bit more on the Italgas Properties that probably was not. It is the first time that we mention. We have recently established a new company fully owned by Italgas. The objective of this company is to manage and to unlock the full value of the group real estate portfolio.
Probably you have never noticed, but this is a portfolio that includes more than half a million square meters, and with an asset value that to me is even more important, the square meter that is past EUR 300 million, for which we are working to make it more efficient as well as creating value for the company. Historically, real estate is a kind of value that normally sits quietly on the balance sheet. What we are doing with the creation of Italgas Properties is bringing the value into the focus and trying to create value and to have a clear accountability in order that, first of all, we manage our real estate asset more efficient, and whatever we don't use, we are going to sell it and create value for the company.
Before we go back to the financial performance, let me talk a little bit about ESG performance. As you know, we always see our ESG performance deeply correlated with the investment and with the action that we take every single day. Given the change in the perimeter that we have already commented for the financial result, we think that focusing on gas distribution like for like basis is more representative. As soon as we will able to make a comparison between the old 2i Rete Gas network with the new result that we are bringing, we will do it. The problem is that there is no comparison between the first quarter of last year with the first quarter of this year. If we stay on a same perimeter, net energy consumption decreased by nearly 15% year-over-year.
This reduction reflect our effort to be more efficient and to introduce new processes as well as new equipment to reduce the use of natural gas for the pre-heating system as well the consumption of electricity. Similarly, Scope 1 and 2 emission were also reduced by 6.6%. As you can see, the major number is coming from reduction in fugitive emission, which testify the effectiveness of use of Picarro in our search. We are doing the same on the 2i Rete Gas network, and by year-end, we will show the result that we are able to achieve also on a fully new network that was not tested before, if not partially with Picarro.
Okay, moving on to page 14. We reported a record high cash flow from operations of EUR 930 million. This was driven by solid operating and financial performance, as well as a favorable networking capital trend. The cash conversion of EBITDA in the first half was over 85%. Our networking capital contribution is positive at EUR 175 million and reflects the billing seasonality that we already observed in Q1. Operating cash flow allowed us to cover the net cash investments in the first six months, amounting to EUR 734 million, and part of the dividend payout. Finally, the cash in from mandatory Italian antitrust authority disposals completed during the first half contributed to more than EUR 250 million positive cash inflow, leading us to reduce our net financial position slightly by EUR 32 million as of 30th of June.
To conclude on this page, our CEO pointed out slide eight on operating costs as the most amazing slide in the presentation. Now, I believe that this is the second most amazing slide. Why? Because we have been able, in a nutshell, to generate cash, and this despite CapEx worth over EUR 700 million, as well as the payment of dividends worth over EUR 400 million. Moving on to page 15. Here we show our debt structure. As a result of the cash flow trend that we just commented, we closed our first half with a net debt of EUR 10.7 billion, excluding IFRS 16 and IFRIC 12, or EUR 10.8 billion including them. Our financial structure remains, as you can see, very solid.
81% of debt is at a fixed rate, the average cost of our gross debt is just under 2.1%, with a strong liquidity buffer of more than EUR 1.2 billion. This is thanks to the pre-financing initiatives executed during the first semester, which will allow us to cover all the upcoming maturities while keeping the needed financial flexibility. Among the key highlights of the first half of 2026, I think it's worth highlighting the decision by Moody's to upgrade our credit outlook to positive from neutral.
According to the rating agency, and I quote, "The positive outlook reflects our expectation that Italgas will maintain sound operational performance and will continue to strengthen its financial profile over the coming years, potentially supporting a higher rating." This is an important external validation of the strengthening of our financial profile, and crucially, it reflects the credibility of the new strategic plan 2026/2032 that we presented only a month ago.
Let me finish before opening the questions. Let me finish about a few comments about the consultation document that was published during the weekend by ARERA on ROSS. Let me just bring you the first elements. I always remind you that this is a consultation document for which the regulatory body will collect comments by end of September of this year. First of all, let me say that it is confirmed that there will be a potential ROSS introduction by 2028, like we knew already, for larger operator only, in a sense that they said in the consultation document, they indicate a potential threshold of 300,000 redelivery point above the operator that will have to for which the regulation will become ROSS regulated.
There are a number of exclusion, not only the operator that are below the threshold, but also all the items that have been already tendered or going to be tendered by end of 2027 will be excluded from ROSS. The regulatory period will start 2028 and will be for four years until 2031. ARERA show in the consultation document three possible option from the option that is the one that we have already. Option zero, let me say, an intermediate option that is probably the most favorable by the ARERA itself and the most extreme one that is a full ROSS application. Then there are a number of other elements for which we are studying, and of course, we will reply with our comments to ARERA by the time set by ARERA himself, so end of September, 25th of September.
I will open the floor for questions, please.
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 and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. First question is from Javier Suárez Hernández, Mediobanca.
Hi, everyone. Thank you for the presentation. I have three. The first one is on the government decree on the gas tenders. You mentioned during the presentation that acceleration is happening. The question for you is, what do you think the decree from the government should introduce in order to further accelerate all this process? The latest news that we are hearing is that maybe a discrepancy between what is happening really and the difficult by the government to create that framework. I guess that it would be interesting to see your point of view on this contribution from the government decree to that acceleration. That would be the first question. The second question, I could be interested on some more granularity on the performance of the Greek water and ESCO activities during the second quarter.
The third is on the creation of Italgas Properties. Can you confirm that this was not part of your recently presented business plan? If so, which could give us additional in terms of EBITDA enhancement, and what do you see the capacity from Italgas Properties maybe on further accelerate the efficiency journey of your company? Thank you.
Thank you for your question, Javier. First of all, on the first question, if you remember, what you are referring, I think, is the Decreto Criteri, if I'm correct, the one that has been postponed after the meeting between Stato e Regioni. I think that is the one that you are referring. This decree was not aimed to accelerate the tender itself. It was just aimed to redefine some of the points that were given to the different tenders, to the tender, let me say, process, in order to reflect the fact that the points already assigned were developed in 2012 when the situation was significantly different. There were no digital activities at the time. There was no AI, no energy transition, no biomethane, no hydrogen. The idea of the government was to redesign the, let me say, the points.
Redesign the way that you evaluate a tender, considering that there are new things coming on. Nothing to do with acceleration of the tender for which we see what is happening right now, independently of this Decreto Criteri. The second question is regarding the result of Enaon. As we told you several times, we are making, I don't know if we have presented during the plan, but we are making significant results regarding the year-over-year. We are going to, tomorrow, to present in Greece, in Athens, we are going to present the plan for the Greek company. Tomorrow we are going to also to show which are the objectives, specific to the Greek territory. If you are willing to join, it's going to be at 3:30 P.M., Athens time.
If you are willing to join the presentation, you are more than welcome. You will get more detail. To be more synthetic, I will say that, at EBITDA level as well as the profit level, we are improving in respect of last year, even though during 2026, we have accounted as a deduction of revenue, the amount that, better, the saving that we have performed in two specific OpEx that are the cost for the smart metering as well as the cost of the managing CNG and LNG. That, according to the Greek regulation, were given as a standard at the beginning of the regulatory period, but were supposed to be finally, based on actual. We were able to significantly reduce the cost of the smart metering as well as the LNG management, thanks to our experience in Italy.
We are going to give back some of these synergies to the Greek system. Notwithstanding the situation, we were able to significantly increase the result, thanks to the cost saving we were able to achieve. The contribution of the Greek company to the overall EBITDA is EUR 71 million. You can also see the contribution of the water that we consolidate. It is only two companies out of four, and the energy efficiency is EUR 70 million at the EBITDA. The last one about Italgas Properties. This is the first time that we talk about Italgas Properties. I don't know if it was mentioned with the strategic plan, but that was part of the strategic plan. The two objectives of Italgas Properties is we want to be even more efficient in managing our buildings.
Between brackets, we recently acquired the building that we are in Milan, Via Carlo Bo. We just acquired at the end of June. The reason is that we were covering nearly 70% of the overall space. It didn't make any sense just to pay a renting fee, we just buy it. It was more economic viable. That was the first step made by Italgas Properties. What we are going to do is to be more efficiently in managing our property and where our property or some of our assets, we don't need them anymore, we would like to create value. One example is Venice, where we have a couple of property that we are not using anymore, for which we are in the process to complete the cleaning of the soil, and once that is cleaning, we will try to create value around this property.
That Venice is probably the more clear example, there are other small properties for which we will probably sell it or we will try to create value around it. That is the objective of the Italgas Properties. The fact that the overall real estate value is above EUR 300 million give you the idea that we are not talking about only peanuts.
Interesting. Thank you.
Next question, please.
Next question is from James Brand, Deutsche Bank.
Hi. Thank you for taking my questions. I have three questions as well, actually. The first one is on the real estate. I think you mentioned essentially a EUR 300 million value. If you were able to crystallize that real estate value, would you have to give any of that back to customers? Is there a regulatory clawback for any value extracted from real estate, or do you just get to keep it all? That's the first question.
The second is on the tenders. I think you said that there was EUR 400 million of potential tender CapEx that you could spend, but I wasn't entirely sure over what period. Maybe you could just clarify, was I right in that being EUR 400 million? If so, was that the tenders that you were highlighting that were coming up over the remainder of this year and the first half of next year?
Was it a different period? Thirdly and finally, on the ROSS consultation that came out a few days ago, there seems to be a preference in there for the base ROSS coming in in 2028, and there may be fuller ROSS coming in later. Could you explain to us how base ROSS would affect you if it came in? I appreciate there's probably a lot of things that still need to be determined yet, but maybe in simple terms, how it might work. Thank you very much.
Thank you. Regarding the first one, remember that all our real estate activities, the property is not linked to the RAB at all. It is called Centralized RAB, but is not considered into the RAB because we can rent or we can buy. Any value that we are able to extract from our real estate property will remain with us, because it's not linked to the network, it's not linked to the OpEx, it's linked to the way that we manage the real estate. I think that is very clear. There's no doubt about that. Even in the ROSS situation. It's not going to happen, never. Any value will be with us. Regarding the tenders, Anna Maria, if we can put up these slides about the tenders, it's going to be easier. Okay.
If you see the page, the EUR 400 million that I was referring is referring to the 13 items for which two are waiting for final award, three will be awarded by year-end, eight will be submitted by year-end, and probably awarded in, let me say, in the first half of 2027. These 13 items that have a clear name, it's not been very well defined. They represent for us, in the case we are going to win all of them, that is the exceptional, the extreme situation, there will be EUR 400 million additional RAB, means EUR 400 million RAB that is owned by a third operator. In case we are going to win all of them, we are going to pay to a different operator EUR 400 million to acquire their assets. I hope that is clear. Regarding the ROSS consultation, you are right.
The regulator refers to the intermediate option as the one they would prefer. Let me say more general. Like you said, we need to, first of all, we should study very well the documents, and even more important, we should weigh the comments coming from everybody and the reaction of the regulator. Let me say one element. If you have read some other parts, Because the base ROSS is relevant to the OpEx, while only probably in the following regulatory cycle, it will also consider the CapEx. Inside the main, let me say, the basic ROSS, there are a couple of options. There are, here again, three options. One is, let me say, an option that is for the one that has limited ambition. Let me use that way.
The third option is probably the one that they don't like it very much, but we can eventually move in that direction. The other two option are relevant to the operator that have more ambition about being more efficient. If you do some maths, just to understand how this mechanism works, it is evident that if you are able to keep continuing reducing the cost, you will keep a significant portion of the incentive for yourself. That option tends to be a very good incentive for the operator that are willing to challenge themself to reduce the costs. That is exactly, it is fitted for us. That is the philosophy that is there.
That philosophy say we are going to, let me say, to award the operator that are willing and that they will achieve year- after- year, not only one year, but year- after- year, a cost reduction. That is what we have done in the last 10 years, we will continue to do also in 2028, 2029, 2030, 2031.
Next question, please.
Next question is from Francesco Sala, Banca Akros.
Yes, good afternoon. Congratulations for your results. Three questions. The first one is on the synergy target. Given the pace of the synergies you have achieved in the first two quarters, I wonder whether you can exceed your current 2026 target. The second one is on the Mark to market for the WACC, if you can share with us an update on where we are now, and whether there is any update from ARERA about the inclusion of France in the panel for the risk-free countries. The third one is about the second half, both in terms of operating costs and D&A, whether we should assume something in line with what we saw in the first half or there's going to be some change in one direction or the other. Thank you.
Okay, regarding the synergies, if we are able to bring more better result, you say, which is the next step? We can always improve, but there is always a limit. I think that the EUR 130 million to be achieved by 2026 is real. I think we are going to be there, maybe a few million above, a few million below, but we are going to be in that range. The acceleration is nice because you enjoy since the beginning, but there are a clear list of activities to be performed, and that EUR 130 million is our target by year-end. We may eventually be slightly better, but couple of millions, I don't expect more than that.
Regarding WACC, the discussion about France, to me, I found it a little bit strange in a sense that, in the definition of the countries to be considered, there is a clear definition about AA country. France is, since last year, I think October or November, I don't remember, when it was downgraded, it is not anymore among the countries AA. I think there is no discussion about the fact that France will not be considered. The discussion is, which other country, AA country, will be included among the panel? That's the true discussion, not the France is included or not. It's not included by definition. Rules is the rule. If you say that the panel of the country that we have to make reference should be a AA countries, France is not a AA country.
That is where we stay. On the WACC, the mark to market, considering the volatility of the market itself in these days, it's difficult to predict what is going to happen between now and September. Let's wait end of September as a consultation period. Regarding the second half, let me say that we have given the guidance, 2026 guidance, one month ago, maybe less. I don't remember. One, two months ago. Oh, right, because it was before the Strategic Plan. You're right. Two months ago, we confirmed the guidance as at the Strategic Plan itself, and we confirmed today the guidance. We will probably be on the higher part of the guidance, sure, as always. There is nothing new. Thank you.
Thank you.
Next question, please.
As a reminder, if you wish to register for a question, please press star and one on your telephone. We have no more questions registered at this time.
Okay, thank you. Thank you, everyone. If you need anything, the IR team will be available. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.