Good afternoon and welcome to the conference for nine-month 2024 results of Iren. And you will be able to make questions at the end of the conference, selecting star one on the keyboard of your device. If you need any technical assistance during the call, you can select star zero on the keyboard of your device, and you will be contacted by an operator. And now I leave the floor to Giulio Domma for the conference.
Good afternoon, everybody, and thank you for joining us on our conference call. The results will be presented by Executive Chairman Luca Dal Fabbro and by the CFO, Giovanni Gazza. So I then should leave the word to Luca to present the results.
So thank you, Giulio. Good afternoon, everyone.
Today we are commenting on the results for the first nine months of 2024, approved by the Board of Directors just a short while ago. EBITDA increased by 8%, mainly due to higher regulated revenues in the networks and higher margins in commodity sales activities compared to the previous quarter, which closed with a plus 5%. The higher growth was supported by the recovery of profitability in the Waste BU, which contributes positively to the group's result. The net financial position amounts to EUR 4.1 billion, and the increase compared to the first half of the year can be attributed almost exclusively to the outlay of EUR 87 million for the acquisition of 50% of EGEA that occurred at the beginning of August.
Since then, Iren ventured into the company's management by taking important decisions to create value, such as the corporate rationalizations of the EGEA Holding Group and the operational coordination of businesses. In addition to WTE, from a strictly industrial point of view, I think it is appropriate to highlight the main results achieved in the third quarter of the year. First of all, indeed, the commissioning of a 38.5 MW photovoltaic plant in Tuscania in July, and second, an increase of 160,000 retail electricity customers was achieved thanks to the two lots won in the liberalization market auctions in July, and then, indeed, in October, we started the collection service in 114 municipalities in the province of Asti, in addition to the 54 municipalities in the province of Cuneo served since March 2024.
To support the large amount of annual investments and insurance and financial structures, September 2024, we issued the sixth green bond of EUR 500 million, which allowed us to maintain a cost of financing well below 4% in line with market expectations. Finally, we strengthened the guidance for financial year 2024. We expect EBITDA to be in the upper part of the range, mainly due to hydroelectric production and better-than-expected performance of the power sales activities. Now, if we move on to page three that we are showing to you, we make an overview of the main ESG indicators that determine the sustainable growth path defined in the business plan, supported by 72% of eligible investments for the European taxonomy.
Regarding the green transition, at the end of September 2024, we have a 4% reduction in carbon intensity as a result of the increase in renewable production and the decrease in gas and WTE production, so waste-to-energy plants. In addition, Iren's strong commitment to increasing sorted waste collection, in particular with the extension of excellence in the recently acquired territories, so these have allowed the group to reach an overall 68% sorted waste collection rate, which is increasing both in historical territories where it reaches 72%, plus one percentage point compared to the nine months 2023, and in the other territories as well where it is almost 63%, with an increase of two percentage points compared to the same period last year.
Also, there is an increase of almost 19% compared to the same period in 2023 of the material recovered in our waste treatment plants, thanks to the contribution of the entire 2024 period of the plants that came into operation last year. And so we have a strengthening position thanks to the increase in the number of municipalities served by the waste collection activity, with almost 490 municipalities, and these will further grow with the addition of 114 municipalities in the province of Asti. Then we have a 7% growth in the customer base due to the increase in electricity customers, and then the continuous extension of the district heating network, which exceeds 101 million cubic meters in terms of service quality. And so the newly approved results confirm the focus on customers and citizens and the continuous increase in the quality of our products and services.
The first half-year data and customer satisfaction now, as such, is consolidated thanks to the opening of four new points in our territory. Iren reaches a total of 69% of the districtized water network with an increase of two percentage points in these focal territories offset by the entry of AcquaEnna into the company perimeter and a slight increase in water withdrawals per inhabitant. So then, slide four, we see the main economic and financial indicators for the period in the EBITDA equal to EUR 924 million for the first nine months, up 8% year- on- year, confirming the trends already reported in the first half year to which is added the pre-announced recovery in profitability for the WAFE BU. Moreover, we can see, first of all, the updating of regulatory parameters in networks and waste for about EUR 75 million.
Then the continuous improvement of the market's profitability thanks to the optimized commercial strategy, so amounting to almost EUR 60 million. Third factor, organic growth in regulated business due to continued investments and inorganic growth related to the consolidation of Acqua Enna and Siena Ambiente for EUR 25 million. And fourth factor, hydroelectric and solar production volumes with plus a 31% increase compared to the previous year. Among, indeed, the headwinds or negative factors, we have a reduction in energy prices and margins with an impact on renewable and thermoelectric production by almost EUR 90 million. And despite these, as visible in the graph, we have integrated energy supply chain management with an increase of EUR 25 million over the previous year. Then lower contribution from energy efficiency activities due to the reduction of activities related to the 110% Superbonus equal to EUR 37 million.
And then the prolonged breakdown of waste-to-energy reported in the first half of 2024 and the non-full operation of the new waste treatment plants that do not fully operate yet, with an impact of about EUR 20 million under EBITDA. EBIT net profit showed growth over the previous year, but with different percentages, with different extraordinary items. And Giovanni will talk about that. And then we have indeed the net financial position reaching EUR 4.1 billion due mainly to the outlay for the acquisition of the EGEA share. And after this, we have the NFP in line. And now the word to Giovanni.
Thank you, Luca, and good afternoon. Let's start with the business performance analysis, as usual, from the network business unit on slide five. The 28% increase in EBITDA of EUR 79 million is mainly attributable to the investments made in the past years, which generated part of the increase in RAB with an impact on revenue constraints of about EUR 10 million and the revision of regulatory parameters for almost EUR 6 million. I also remind you that the integrated water service is positively affected by the extraordinary recovery of inflation on operating costs in 2023 for EUR 9 million approximately. Secondly, the positive contribution of AcquaEnna and consolidated companies from June 2023 with a contribution of about EUR 4 million. The investments focused mainly on the integrated water service and electricity distribution show a significant growth of 13% compared to the same period in 2023.
Investments were also aimed at increasing quality of service, which allowed us, for instance, to reduce the duration of outages due to faults on the electricity network by 30%. The increase in the RAB of almost EUR 100 million, plus 11% compared to year-end figure for 2023, is achieved thanks to the equally large contribution of investments made in past years in the regulatory evaluation linked to the application of the deflator, approximately 5.5% weighted average rate. For the fourth quarter, we expect the performance of EBITDA to be in line with the previous quarter's net of the above-mentioned extraordinary component of EUR 9 million recognized in the first quarter.
Now, moving on to slide six, we delve into the waste. That at the end of September, we note the turnaround of this business unit, which in the third quarter fully recovers the drop of EUR 7 million in the first half of the year, recording plus EUR 14 million in Q3, thus closing the first nine months with an EBITDA increase of 4%. The boost to the growth comes from the collection business, which shows an increase in EBITDA of EUR 27 million, basically doubling the growth of the first half of the year due to the full recognition in the tariffs of the higher costs associated with inflation. Secondly, the efficiencies achieved in operations, as well as the completion of the approval processes of the new economic and financial plans for services, which happened in Q3.
The treatment and disposal business, supported by the growth in managed volumes, plus 7% versus 2% in H1, however, maintained the margin contraction reported in the first half due to the effect of lower plant availability due to plant maintenance and breakdown of the Turin WTE recorded in the first half of the year. Secondly, substituted the prolonged startup phase of the new waste treatment plants, which generated an increase in related costs for either the worsening of the energy scenario or the negative impact on the development of electricity and thermal energy produced by WTE, both the progressive exhaustion of the disposal capacity of some landfills. Partially mitigating the results, the negative results of the treatment and disposal plants, was the positive contribution of Siena Ambiente, a company consolidated since the beginning of the year, which contributed around EUR 10 million in the period.
The fourth quarter is expected to be basically in line with the last year, as the higher margin for collection activities will be offset by the lower contribution from plants, partly due to further plant maintenance on the Turin WTE plant scheduled for the final months of the year. On slide seven, we can see the factors that led to the contraction of 29% of the energy-based EBITDA. Renewable generation benefited from higher hydroelectric production volumes up by 29% and photovoltaic production up by 42% thanks to the contribution of new plants built in the period. This volume dynamic more than offsets the decline in energy prices compared to the previous year.
It is important to note that the average sales price in 2023 was supported by hedging activities, which had been brought forward in 2022 and which had allowed for sales prices higher than market prices in the first nine months of 2024. In fact, the average electricity selling price, although higher than EUR 110 per megawatt per hour, is the result of a declining energy scenario, although recovering in the third quarter. Also, note that the abundant rainfall in the period allows us to have more water in the basins and the reservoirs, and therefore we expect to reach a record of 1.4 terawatt per hour of hydroelectric production by the year. As a seasonal service, the contribution of district heating did not change significantly in the quarter, confirming the reduction recorded in the first half of the year.
Third point, the dynamics for cogeneration and thermal electricity CCGT are very similar to the first half of the year, decreasing Clean Spark Spread at lower volumes due to the few hours of positive margins and weak MSD, with a further reduction of EUR 3 million in EBITDA due to the lower contribution of MSD in the third quarter. Fourth point, finally, energy efficiency activities. We reported a decrease of EUR 37 million in this line due to the termination due to regulatory changes of upgrading works related to the 110% Superbonus incentives. Looking at the last month of 2024, we expect a result of about EUR 20 million less than in the fourth quarter of 2023, as the energy scenario is less favorable and is only partly offset by higher hydroelectric production.
Completing the picture of the business unit, we move on to the market BU, slide number eight, where the growth already reported in the first half of 2024 is confirmed thanks to the alignment of our commercial policy based mainly on offers with index prices associated with fixed quotas and market conditions. At the end of September, Iren's portfolio consisted of more than 2.3 million retail and small business customers, with a prevalence of electricity customers over gas customers, as you can see in the top right-hand chart. This trend is also in the chart in the lower right-hand corner of the slide. This trend is also the result of the electricity market liberalization options that allowed us to acquire 160,000 new customers, a dynamic that we value positively in a market context that is seeing increased competitive pressure.
The effects of the growth in electricity customers can also be seen in the top right-hand graph, which shows the volume sold increasingly by 10% compared to last year. On the contrary, the decline in the volume of gas sold to end customers is due to increased competitive pressure on customers and unfavorable weather conditions, with falling consumption due to high temperatures recorded in the early months of the year. Moving on to the Iren Plus line of business, there is a growth in sales of products and services to retail customers bundled with commodities such as insurance and connectivity services, which continues. This is important to underline that we sold over 400,000 products and services during the period with a very high adoption rate.
The fourth quarter is expected to be slightly lower than last year due to increased competition from retail customers and lower margins from customers acquired in the market liberalization options.
Going back to an overview on page nine, we look at the elements that lead from EBITDA to group net profit. Depreciation and amortization increased by EUR 45 million, of which EUR 36 million due to investments made, and EUR 9 million related to the companies recently integrated in the consolidation scope, Siena Ambiente and AcquaEnna. Provisions and write-downs include two extraordinary items. 2023 includes the provision related to the decree on the so-called extra profits of EUR 41 million, while 2024 includes a EUR 6 million write-down related to a plant for the treatment of plastic from sorted waste collection, which is currently not operational due to a fire in the month of August. There is also a slight increase in provisions for bad debts for EUR 5 million due to the increase in receivables related to direct billing to citizens for waste services, previously billed to municipalities.
And then the average cost of that was 2.1% versus 1.8% in the nine-month period of 2023 and is stable compared to previous quarters. Finally, group net profit for the period amounts to EUR 193 million, up plus 9% year- on- year. There is also a higher tax rate for the period of 30.1% compared to 26% last year due to the known taxability of extraordinary contributions to compensate for the high cost of energy and also higher profit attributable to minority interest for EUR 11 million. Then page ten, now with the net financial position for the period. So the debt at the end of September 2024 was up plus EUR 173 million compared to the value at the end of 2023 and plus EUR 94 million compared to the data at the end of June, mainly related to the purchase of 50% of the share, which took place in July.
As already seen in the half-year report, the operating cash flow of EUR 713 million at 30 September benefited not only from EBITDA, but also from the release of tax credits from 110% Superbonus for 2024, amounting to EUR 250 million. Net working capital increased by EUR 90 million and the reduction in the change of the net working capital compared to the half-year, which amounted to EUR 300 million, is due to the positive contributions of a higher sale of electricity on the exchange with a short-term settlement against the higher consumption of gas in the third quarter for thermal electric production with deferred payment. This trend temporarily reduces the growth in CCN, which we confirm is expected to be EUR 150 million at year-end.
This increase, as already anticipated for the half-year, is attributable to about EUR 100 million to the fact of the declining energy scenario as long production decreases the financial benefit of sales of the stock exchange with weekly collections and to higher receivables not immediately billable in regulated businesses due to regulatory increases for the portion exceeding the tariff cap, and then EUR 50 million related to receivables and investment grants related to the National Resilience Recovery Plan, for which the reimbursement procedures by the state are longer than expected. Operating cash flow generation for the period fully covered technical investments of EUR 560 million and M&A transactions related to the acquisition of 50% of EGEA, the consolidation of Siena Ambiente, and the acquisition of authorizations for the construction of the new agrivoltaic plant, and all of these operations amounted to a total of EUR 111 million.
I then leave the floor again to the chairperson for focus on the consolidation of EGEA and for closing remarks.
Thank you very much, Giovanni. I would particularly like to take this opportunity to inform you that Iren's board of directors has today resolved to subscribe EGEA capital increase of up to EUR 20 million to finance the development of Alessandria's district heat network. This action will allow us to reach a 55% share, which, by bringing us to corporate control, will enable us to consolidate as early as 2025, one year earlier than contemplated in the industrial plan, and to accelerate the governance optimization processes in order to extract synergies more effectively and quickly.
From an industrial point of view, the consolidation will serve all of Iren's businesses, with an increase in the overall RAB between water services and gas distribution of over EUR 100 million, approximately 300,000 inhabitants served by waste collection, 10 MMC of district heating volumes, almost 200,000 gas and power customers, allowing the group to increase its presence in its reference territories, especially the Cuneo area and an area between Chioma and Liguria. And this will also generate an increase on Iren's 2025 numbers at NFP level of EUR 170 million, including about EUR 10 million in investments for the development of district heating in Alessandria and, in terms of EBITDA, between EUR 55 and EUR 60 million.
So regarding year-end expectations, the nine-month results allow us to confirm year-end guidance in the higher range with EBITDA of EUR 1,250 million, plus 4% compared to forecast 2023, and up by EUR 10 million compared to previous guidance due to better expected results in the market BU and higher hydro volumes in the second half of the year. Group net profit in the region of EUR 260 million to EUR 270 million, plus 4% compared to last year. There is no further increase in net profit due to the extraordinary write-down of EUR 6 million due to waste-to-energy treatment plant reportedly this quarter. Total investments of around EUR 1 billion and NFP EBITDA ratio of 3.3 times due to the operating cash flow, which was fully covered investments for the year. And now we can then start with the Q&A sessions.
Thank you.
I remind you that you can make questions by selecting star one on the keyboard of your device. Then the first question comes from Alessandro Di Vito f rom Mediobanca,
Thank you. Good afternoon and thank you. Thank you for receiving my questions. I have three of them. The first question is, can you please give us an update on the discussion with the government concerning the renewal of expired hydroelectric hydro production concessions? We saw that some of the concessions have come to expiry. The second question is this: can you please remind us about the two lots of regulated customers? How many of them were in the two groups? And have you managed to extract some value from them since the EBIT figure was positive? Third question: can you please give us an update on the potential profit from the portfolio of renewable energies, which was already part of your business plan? Thank you.
As to Hydro update. Iren is in a slightly different situation as compared to other, we saw the majority of other operators.
Last year, we submitted a project to the Piedmont region, which includes a revamping or launch of new assets. This project won, which means there will be an auction on the implementation of the project. And the winner will be the one that will make the most competitive bid. So we're now waiting for the various phases of the project, and there is an initial discussion going on where the region has to set up the auction. And when the auction is launched, we will participate in it. The way the project has been set up, we'll have a call option. So this puts us in a favorable position. So we have a last call, sorry. So we are in a strong position as far as customers are concerned.
They are 168,000 in total in terms of new net customers with a negative margin of about EUR 40 per customer per month, which is equal to the cost required for the previous years. So we believe we made a good purchase because it pays back in two, three years, and it is remarkable. In the retail market, two, three years is the minimum payback time. There are operators investing more money, and they have to wait for four, five years. So we're very happy with that. As to your third question, i.e., the state of renewable questions, sorry, renewable energies, if I understood your questions correctly, we're making our own assessments and evaluations. We want to try and understand whether, considering the definition, the FER-X, whether we can better evaluate these assets.
We are actually waiting for the finalization of the FER-X system to understand which is the best way to position ourselves on the market. If the FER-X is the best to position our assets, we will decide. We have three options ready, depending on the FER-X, because the FER-X is a game changer, and maybe it can add value to our assets. So we don't want to add or lose value before we see the FER-X. I hope I answered your questions. Thank you.
Thank you, Mr. Alessandro Di Vito. The second question comes from Roberto Letizia from Equita over to you.
Thank you. Good evening. I would like to bring the attention to 2025, if possible. So can you please give us an outlook for the next year in terms of positive and negative contributions for Iren?
Although you already talked about the contribution of hydro that we expected, what is the level of coverage that you have for 2025? What is the expected production of hydroelectric power? What is the expected growth outlook? As to waste, I don't know how you're rationalizing your activities. In Q3, they already recovered positions. But can we expect full operation of plants and the recovery of profitability already in the next year? So what is the outlook for the waste market? And then I'd like to have some information on the regulatory situation for the next few years. Thank you.
We believe that 2025 will be in line with our forecast outline in the plan approved in June, with details for the BUs that we will try to convey to you. Some details will cover other questions.
On the network BU, we expect an improvement in WAC for considering home customers and others, but we expect an increase due to the deflator. So the update of deflators will basically provide a positive contribution to this position. As far as waste is concerned, it's facing some difficulties in the ramp-up of new plants. We expect to be able to recover another EUR 5 million-EUR 8 million from these plants, but we know that a number of difficulties will still be there, especially related to the plant, considering the market prices that are not stable yet. As to the power business unit, we've already covered 70% of the hydroelectric production at a value of about EUR 105 per megawatt per hour, and 25% only of the thermal electric production with a change of EUR 2-EUR 3 per megawatt per hour.
For the energy BU, it's important to underline the contribution of the capacity market, especially the options for the delivery of 2025 have already been carried out with a price per megawatt per hour of EUR 45 versus EUR 33 per megawatt per hour of 2024. So here we have a confirmation of about 1,900 megawatts of expected power, which is a major upside in the business unit. In the first month, we do not expect further increases in the declines, but we expect a balance. As for the hydroelectric production, 2024 was an extraordinary, exceptional year, which will allow us to have levels of the reservoirs slightly above our historical path. And we expect a 1.3 terawatt per hour of production in 2025.
Thank you very much.
Thank you. Next question from Emanuele Oggioni from Kepler Cheuvreux. Please, the word to you.
Good evening, everybody. Thank you for the opportunity. Just a couple of clarifications. One, regarding hydroelectricity production. Before in the call, you mentioned 1.4 MWh for 2024, but I thought that during the H1, you said 1.6 or 1.7, which could be actually a growth more in line with 1.3 in 2023 due to the greater rainfall and snowfall that characterized 2024. Then you're thinking about going back to 1.3 in 2025 that you had in 2023, and that could be considered a normalized level. One last thing, regarding the retail department, the energy supply, the results of the nine-month period were quite strong, but then the guidance for full year 2024 implied a decline in the EBITDA in Q4 2024 compared to 2023.
Could you explain us the dynamics in this business unit, please?
Regarding the target 2026, that was correct, but regarding the hydroelectricity production and also photovoltaic production, we had notified the value for the summer period, and with respect to that value, we could say that the rainfall in the third quarter implied an increase by 50 GWh of production in hydroelectricity. So that mix of 1.6 MWh included a target of 1,350 hydroelectricity that today can increase to 1.4. So it was correct, but it referred to a different mix of power supplies.
Regarding the profitability of the market BU, in the last quarter, we expect a lower profitability compared to last year by about EUR 10 million-EUR 15 million because last year we had instead a significantly favorable trend both in profitability and also because the thermal season and also regarding gas, that was a conservative indeed forecast, but we are not reaching the seasonal averages.
Thank you.
I would like to remind you that you can make questions selecting Star 1 on the keyboard of your device, please. We have a question from Roberto Letizia from Equita.
Yes. So just a clarification on EGEA. I don't remember if EUR 55 million or EUR 60 million EBITDA we should have next year. Was it a starting point and an arrival point, a target point? I think it was more of a target point. So are we starting from EUR 55 million-EUR 60 million?
Can you tell us something more about the guidance data of EGEA? What is the target point in a couple of years regarding the EBITDA?
The value is an estimate for the year 2025, so it could be considered a target point and arrival point, but we could not expect a higher increase based on what we know so far. We can say, and we've decided to enter with the majority capital, and starting from today, we will have a more impact and more effective impact on the governance. In case there is a further improvement, we will notify this to you. As of today, based on the current knowledge and calculations, we may develop to EUR 55 million, EUR 60 million EBITDA for EGEA, and then we will see whether we can reach further improvements.
For sure, EGEA is a platform that is expected to grow, and synergies, of course, are potentially all very positive elements.
Thank you. Another question from Francesco Sala from Banca Akros.
Good afternoon, and thank you. I have two questions. The first one is about gas. What assumptions did you make in terms of volumes for the thermal season, which can be an element of caution compared to guidance? I'd like to understand the upside of this business unit in the next few weeks. Second question is compared to the consolidation, which can be seen in the gas industry. Are you considering some potential M&As as consolidators or as a rationalization approach, or are you not considering those options?
Well, we're assuming a reduction of 10%-15% decline in volumes in the last quarter. As to consolidation in the gas industry, we are very reactive to all market signals and signs, but we're also very mindful of return on investment. So we would not buy gas or electricity distribution options with major expenses.
If the profitability is high to the point that we can keep the guidance that we established with profitability, if so, we are willing to buy, but we do not buy for the sake of buying. So it means that we keep an eye on our financials, and at the same time, we want to keep the value of the stock high.
Thank you.
Let me remind you again that you can ask your questions by selecting Star 1 from the keypad of your device. Since there are no more questions, I'd like to hand over to Giulio once again. Thank you.
Good. Thank you very much again for your attention, and I'll see you next time. Bye-bye. Thank you.