Good afternoon, everybody, and thanks for spending part of your time with us. I have beside me our CEO, Mr. Gianni Armani, and our CFO, Ms. Anna Tanganelli. Before starting, let me give you the agenda. First, we will show a video which features the various challenges that we have been facing over last year. Then the top management will guide you through the full year 2022 results and the business plan update. At the end of the presentation, we'll have the first Q&A session dedicated to the financial community, analysts, and investors. Finally, the Q&A session's for journalists only. Let's get started. Play the video, please.
Putin chose this war, and now he and his country will bear the consequences.
The Governing Council decided today to raise the three key ECB interest rates by 75 basis points.
Thank you, Giulio. Good afternoon, everybody. Thank you for attending our call on full year results, 2022 and the update of our business plan to 2030. It's another statement to say that last year was a really challenging one. You have just seen on the video, geopolitical tensions, adverse climate conditions, regulatory uncertainties, strong inflation, soaring interest rates, all these impacting our sector. Despite all these headwinds, the performance of the company once again was pretty impressive, showing that we are a resilient company, we deliver results, and most of all, we keep our promises.
In addition to this, our strategic vision is presented in 2021, was properly drawn and is confirmed even in this completely changed scenario. Starting on slide four, on 2022 results, we would like to give you a snapshot of the key financials. Iren reported an ordinary EBITDA of EUR 1.06 billion, up 6.4% versus last year, excluding non-recurring items. We experienced several extraordinary conditions, some that were general in the sector, some were company specific.
The company, the group, overall, carried out the highest level of gross investments in its history, EUR 1.5 billion of gross CapEx up 56% versus last year, anticipating part of the plan. This is a signal that we are able to seize opportunities, anticipating industrial targets and set up the path for future growth. Finally, thanks to the robust EBITDA generation, combined with extremely good managing of working capital, the group have been able to minimize that growth, bringing our leverage below the target initially set in the plan, with Net Debt over EBITDA ratio below 3.2.
Moving to slide five, it is important to highlight the main factors that occurred in the plan that led to 6.4% growth in the ordinary EBITDA evolution, excluding non-recurring impacts. On the negative side, as presented in the quarter calls, the lowest level of water reported in our basin, the lowest ever reported, 770 gigawatt-hour of production reduction of 36% versus previous year, resulted in a loss of EUR 85 million in profitability, equally split between energy and market business unit. In absence of hydro volumes to match the consumptions of clients, the in natural aging Market reported a loss due to the need to purchase energy in the market at higher prices.
The absence of hydroelectric volumes will no longer, even, next year, impact on market margins as we change our edging policies on this element. The reduction on heat volumes, minus 14%, 2.9 terawatt-hour distributed in 2021, in 2022. This is a result mainly of higher temperatures in Q4 and a combination of energy saving actions that were brought out during the last part of the year. This determined EUR 20 million reduction in profitability. On the positive side, the capacity market contribution was EUR 68 million.
Renewable, the new plans acquired at the beginning of the year, resulted in a contribution, a positive contribution of EUR 50 million, thanks to the favorable energy prices. Organic growth brought additional profitability of EUR 30 million, thanks mainly to efficiency in the business, in the network business and increased profitability from new plans that were entered in operations, particularly the biomethane production in waste business. On network, the allowed revenues increased thanks to the increased RAB, especially in water and electricity, partially offset by the reduction in WACC that was led by the regulatory review and higher operational cost.
On waste, we report a supportive pricing scenario on energy sold by via WTE and the phasing of new plans with higher prices and volumes of recovered material in waste intermediation. On collection, otherwise, the margin reduction is caused by the higher operational cost, mainly on fuel, partially offset by the consolidation of Sei Toscana in the second half of the year. In energy, prices and clean spread of electricity and waste were up, where MSD, the dispatching market, was down compared to the exceptional results of 2021 to EUR 80 million. Thermoelectric and cogeneration production decreased by 17%.
This was a combination of cooling problems that were experienced, especially in the summer, by for the drought, and the failure of a turbine, particularly in Turbigo in Q4, that has recently restarted operations. More than EUR 20 million of higher contribution coming from electricity efficiency projects were registered in the energy business unit. Finally, market, the strong reduction in electricity margin, as said, was mainly driven by the impact of extraordinary high prices on unhedged volumes, combined with the prohibition in H2 to activate the planned repricing campaign that we communicated.
On top of that, the exposure to market prices was greater than expected due to the hydroelectric production reduction that we mentioned before, and the higher supply volumes that were unexpected due to higher consumption in electricity on client and the lower churn. Overall, we registered an increase in demand on electricity of 34%. Let's now take a look at the main at the video that summarizes the main achievements. Thank you. Turning on page seven, we would like to summarize the key achievements business unit by business unit. On network, we reported 8% EBITDA growth leveraging on the growth of RAB that was up to EUR 2.5 billion thanks to almost EUR 330 million of investments.
Two small operations contributed to the result with the acquisition of SAP company, which is not an IT company, of course. It's Liguria water service distributor with 34,000 inhabitants, and the acquisition of gas networks in Vercelli and Savona from Ascopiave as an optimization of 82A gas network acquisition. On waste, 16% profitability growth was driven by the additional treatment capacity of over 370 kilotons per year, resulting from three plants that enter into operations by the end of 2021 and beginning 2022. One paper and plastic selection plant, two organic treatment plants.
The consolidation of Sei Toscana and the company managing the collection service in south of Tuscany, and favorable energy prices on, as mentioned, on WTE. Almost EUR 200 million investments were carried out during the year, mainly for the construction of treatment plants that will start operating in the next years. The first plant that will enter into operations is going to be wood recovery and pallet production plant in Vercelli in the Q2 2023. In energy, we reported high level of profitability sustained by solar assets acquired at the beginning of the year, counterbalanced by the drought and the thermoelectric production difficulties.
On the positive achievements were the startup of the new combined cycle in Turbigo, a 400 megawatt plant that has long-term capacity market, and the construction of a new renewable capacity for 70 megawatt that is currently going on this moment. We also reached 101 million cubic meters of district heating. On market was strongly affected by the volatility of the electricity prices and the impossibility to adapt the contracts to the new scenario. On the other end, the performance commercially was quite exceptional.
We reached 2.2 million retail clients, adding more than 200,000 to the total number, also thanks to the acquisition of Alegas, the company that is active in Alessandria. We also experienced a significant growth in the penetration of IrenPlus services on our clients, that reached a rate of 32%. Finally, Smart Solution reported a spike in profitability sustained by government incentives, particularly Superbonus 110%, leading to almost 300 million EUR of gross investments. I will hand over to Anna, that will illustrate the performance and the key PNL items.
Thank you, Gianni. Good afternoon, everyone. Moving to slide eight, let's take a look at the main metrics below EBITDA. Depreciation was up EUR 45 million versus prior year as a result of the investments made during the year and the acquisitions and consolidations carried out during 2022. Provisions for bad debt increased by EUR 10 million versus previous year. This is linked to the exceptionally high revenues in the period and as a result, the high receivables, which obviously drew also the provisions for bad debt. Please note that to date, we have not yet experienced any significant deterioration in our overall credit portfolio, nor in our past dues.
As for other provisions and write-downs, here, as you might remember, in H1 2022, we released a legal provision for EUR 12 million as a result of the positive settlement of certain claims with suppliers and with other institutions, while 2021 had been negatively affected by an asset write-down. Please note that in this line item, we also booked the impact of the Decreto Sostegni-ter, i.e., the price cap on renewables for approximately EUR 5 million. As for financial charges, they were positively affected in 2022 by the reduction in our average cost of debt. This is a remarkable result, especially considering that the overall market is actually moving, as you very well know, into the opposite direction. We closed 2022 with 1.6% of average cost of debt versus 1.7% in 2021.
This result was achieved thanks to our high share of fixed rate debt, I would say an optimized sourcing of our funding during 2022 and the overall prudent management of our liquidity. In this line item, you see also there is an impact for EUR 21 million of a derivative as a result of the non-foreseeable sudden change in the ARERA index used to set gas and heat prices. The index was changed from P4 to PSV in the summer of 2022. This, as I said, affected a derivative which accounted for EUR 21 million negative. No particular remark on taxes here. I would only comment the impact of the contributo di solidarietà decree for EUR 27 million, out of which EUR 3 million are related to 2023 Italian government budget law. Minorities were up EUR 14 million year-over-year.
This thanks to the good performance of our non-fully-owned subsidiaries, above all the WTE in Turin. As a result, our group net profit reported for the year reached EUR 226 million, which is down EUR 77 million versus prior year. However, if we adjust both this number and 2021 for all non-recurring and one-off effects we experienced in the year, I remind you in 2021, the impact was positive for the one-offs for EUR 40 million, and in 2022, it's negative for EUR 27 million. The adjusted net profit number was EUR 253 million, i.e. down only 3.8% versus prior year.
If we move to slide nine, if we look at the net financial position evolution, net debt increased by EUR 441 million year-over-year, reaching EUR 3.3 billion at the end of 2022. This is a result mostly of the acquisitions made during the year and the dividends distributed, while industrial investments, as you can see from the chart, were almost fully absorbed by the strong operating cash flow generation in the year. Here I would like to stress and bring your attention to the very good performance of our change in working capital, which remained more or less flat year-over-year as a result of three main factors.
One, the partial disposal of our gas storage towards the end of last year to accelerate the related monetization and also to avoid potential write-downs. Second, an optimized time to cash. Third, we continued to benefit throughout 2022 of favorable payment terms with our energy suppliers. These three elements more than offset the negative impact of the increase in receivables, as well as the impact of bills installment payment provision and of the temporary elimination of system charges introduced by the Italian government in 2022. Last comment, the mark to market of fair value of derivatives, which was positive for EUR 170 million at the end of the year, this mostly linked to our interest rates hedging positions.
I would like to stress the fact that throughout 2022, and as of to date, Iren does not have any meaningful exposure to margin calls on its energy derivatives. I would now hand it back to Gianni to go through our 2023-2030 business plan.
Thank you, Anna. As mentioned, all our pillars are actually confirmed and strengthened by the new scenario. First of all, the 2022 results and investment carried out last year that anticipated the plan from what was forecasted, confirm the effectiveness of our capacity to put in place the investments that are foreseen. Most of all, the three pillars are in line with what we expect, the major trend that will lead to particularly green. The leadership in green transition is reinforced the trend towards the expansion of renewable capacity. We have been successful last year in implementing for the first time the structure that is operating this sector.
As well as the investment in new treatment, waste treatment capacity, is going in the right direction, supporting this pillar. Local, local presence, we have proven that this pillar is able to generate value for the company and for the community that we serve. With our know-how and the relation that we have with local institutions, we are the ideal partner to capture opportunity derivings, deriving for instance, REPowerEU funds. We have been able to capture funds in contribution this year for EUR 160 million, to define private partnership contracts that solve local needs and extend our concessions, to boost energy efficiency programs in partnership with the local authorities, and to exploit energy community opportunities.
In addition, quality, excellence in service quality, across all business is an habilitator of our three pillars, stretching from client coverage and effective physical presence and direct contact with our clients, enhancing also and taking advantage of digital technology. Recent sector macro trends have further reinforced our vision, as we can see on next slide. In particular, geopolitical effect that we experienced last year, like energy crisis, has increased and they increased the commodity prices reinforce our intention to carry out investments on and expand our renewable capacity and develop energy community using our local presence as an accelerator.
The disruption of logistic supply chain reinforce the value of having recycling plants that recover a wide range of materials, such as electronic waste, plastic, wood, but also rare materials from electronic waste. The European regulation framework has pushed electrification on all sorts of consumption, heat, of course, but also acceleration in e-mobility will lead to increased consumptions in electricity. Energy efficiency has become one of the pillar of main initiatives that EU is putting in place. Moreover, REPowerEU funds are focused in most of the area where we invest, and strategic projects can be developed in partnership with our local authorities in order to capture the opportunities.
On the macroeconomic front, we experienced a strong increase in inflation and interest rates. Our reinforced position on regulated activities is acting as a shield, confirming the intention to go in this direction in our strategy. Having confirmed the pillars, we also confirm the targets that we presented last year. First of all, we are reinforcing the investment plan that we have in place that will grant growth in the future. We are projecting a €10.5 billion accumulated gross investments in 2023, up to €200 million versus a similar figure of last year. EBITDA grows 7.4% out a compound rate, average rate, versus 6.9% reported in last plan.
We confirm the commitment to keep our leverage below the 3.4 target, of course, arriving to much better performance by the end of the plan. Additionally, we confirm the intention to invest mainly in sustainable growth. 80% of our total investments are going to be inside the sustainable frameworks. Particularly, we co-committed to reduce the carbon intensity of our electricity generation to 175 gram of CO2 per kilowatt hour. A path that will lead us to the carbon neutrality in 2040, in line with science-based target initiative.
We also aim to double our treatment capacity of waste up to five million tons per year in 2030, and we are targeting 20% losses in our network, leakages in our water network, from our current performance of 31%, which is already much better than the average in Italy. That is 40%. On the local presence front, we confirm the intention to invest in our reference areas and reference regions 85% of our resources, expanding our presence and our client base both in water collection and in water distribution and waste collection, water distribution and district heating.
We are going to develop energy community as a mean to grow in renewables, but also to reinforce the relation that we have with our clients, targeting 400 megawatt by 2030, with more than 250,000 clients linked to this form of contract. 50% of our investments are intended to improve quality of service in order to reach leadership in the areas and in the services that we will provide. This is a key success factor in order to grab the opportunities that we envisage in the business plan. We are going to improve on different dimensions. On industrial KPIs, such as increase the purification capacity of water by 15%.
We will increase the districtialized water network to 90% in order to manage real-time operations also in this network. We will improve commercial KPIs, increasing by 55% the new stores, and improve the physical connection with our clients. In addition, we will in-source 75% of customer care key activities in order to grant the highest quality of service to our final class customers. On the digital front, we will take advantage of technologies arriving to 100% of energy meters installed and improve the quality of service, for instance, the reduction in interruption frequency by 40%.
An example of how our investments interrelate and take advantage of the three pillars of our strategy is the way we are developing renewables in our business plan. First of all, the starting point. In 2022, starting from scratch, we have been able to install 145 MW of new capacity, of course, in part from acquisition. 70 MW are under construction and will enter into operations during this year. More than 400 MW are under authorizations, so this is internal development. 400 MW, 900 MW of new capacity has obtained the connection to the grid, the first element of the authorization process that will lead to additional pipeline.
This enables us to increase the target that we envisaged last year to 303 gigawatt of new capacity by 2030 instead of 2.2, as we presented last year. Thanks also to a combination of energy community solutions that will boost the development of our initiatives, especially in the North, but also a program of offshore wind that we are developing and from which we had already the connection to the grid granted. This will be developed with a new model in which Iren will develop and operate the plant without minimizing the investments that are going to be performed by the company directly. In order to improve the stability of our...
The returns of these investments, we have also included in our portfolio PPAs with clients reaching 60% of total capacity. This will stabilize returns in the long term. In addition, the growth will be accelerated using and taking advantage of a minority partner that will be included in the venture next year. Overall, here you see that our plan is highly sustainable, with 80% of investments classified as sustainable and 75% as eligible in the EU taxonomy. Overall, We can report that our investments are 70%, into businesses that are regulated or semi-regulated.
In addition, our plan is significantly flexible because 30% only of our total investments are devoted to maintenance, and so they are not, cannot be deferred. 12% of investments are foreseen as external growth, so the plan is highly controllable. 20% of investments planned are backed by external funding both from private sectors and from public funds. In addition, we have identified additional opportunities for growth that are not included in our plan that are all involving regulated businesses.
Some of these you already know, such as Gioia Tauro LNG plant, regasification plant that might be included in the Mattei reinforcement plant, that is aiming to create a Mediterranean hub for LNG. This is going to be an investment that eventually will be granted a tariff to be implemented. We are looking also additional WTE infrastructures in the South. Investments in the water network also in the South of Italy, where leakages are extremely high, above 50%. Purification of water is very far from European standards. New district heating infrastructures will be an option in case new funds and contribution will be granted on these kind of projects.
Overall, we have spotted EUR 1.5 billion of additional investments in which we aim to play the role of developer and manager, bringing with us professional investors that will guarantee returns on and sound financial management of these initiatives, minimizing CapEx from Iren. Let's move forward to the action plan. We going through the different networks, I will briefly highlight the main elements of the action plan to show the concrete actions that we are putting in place. On networks, we focus on provide high quality, so most of the investments are improving the networks that we serve, and also in improving our operational efficiency.
Infrastructure improvement will lead to a doubling of the RAB, which will reach EUR 5 billion at the end of the plan. This is a combination of investments in our areas plus geographical expansion. In particular, on water networks, where the RAB will grow the most, we are investing in particularly in purifier. We have five plants under development and the revamping of existing plants, plus inorganic growth outside our regions. In electricity, we invest in order to have, by the end of the plan, a smart grid that is ready to serve higher consumption per client and to host mobility electrification.
On gas network instead, most of the investments are in granting high quality standards on our networks, but additional tenders are envisaged after 2026. Of course, I recall the fact to all of you that we are projecting in 2023 the sale of a minority stake in a special purpose vehicle that is collecting all the gas asset of our network. Overall, the project just described amount to EUR 3.6 billion of investments, of which 60% are located to water network and the rest evenly split between electricity and gas.
This will lead to a 7% year average increase, reaching EUR 730 million by the end of the plan. It's worth mentioning that this EBITDA growth is envisaging the constant WACC remuneration, even though interest rates and inflation have increased significantly over this period. In waste is one of the areas in which we are investing the most and is part of the green transition pillar. Starting on collection, we in order to guarantee flows to saturate our treatment capacity, we are envisaging the expansion of our geographical presence. This is going to be through consolidation, M&A and tenders.
We are projecting to grow collection flows to 80%, reaching 3.4 million tons per year collected. We are also pushing for sorted waste share, reaching 77% by the end of the plan, using also and pushing the rollout of a pay as you throw model on the tariff scheme. On waste management, instead, we are going to develop 22 plants over the plan, 70% of which are authorized and under construction and will enter operation before 2026. Most of the capacity is focused on material recovery, organic frag fraction, wood, paper and plastics. We are adding to our business lines also electronics, textile and batteries.
In the plan, we are also have reprogram the capacity of organic waste treatment plants in the North due to overcapacity signals that we are experiencing in the short term. EUR 2 billion are planned to invest in this sector, 64% in new treatment capacity and 36% in collection, leading to a 7% growth in EBITDA, as shown in the figure. On energy, the development of a renewable capacity to adding 3 GW to our current hydro capacity. This is going to focus mainly 70% on solar, 30% on wind.
On top of this, we are projecting to extend our hydro concession thanks to the renewable we have recently presented to the institutions a public-private partnership proposal that is under evaluation by the Piemonte region. By the end of 2030, as said, we will reach 3.6 gigawatt of renewables under management. In this area, as said before, we are projecting and looking to develop our renewable portfolio with a strong share of long-term PPA to be developed along with our plant, but also that will involve third-party plants, so without our direct investments.
Strong support of energy communities will be performed through two models, the producer model and the seller model that I will explain better in a following slide. The co-development of offshore wind plants in order to exploit the value of development of new infrastructure in this sector. Furthermore, we will develop storage systems combined with the renewable capacity as this will come into the money. Thermoelectric generation is part of the decarbonization program that we are envisaging. We are, we will invest in flexibility, particularly on air cooling facilities in our plants, in order to tackle the incentives that Terna is envisaging for the future.
During the next months, we will conclude their cooling system in Moncalieri, and we are starting a similar option for Turbigo. As already said in the previous year, we are assuming to sell off in 2026, the Turbigo facility, that is the only plant that is market exposed and not linked to a district heating infrastructure. Regarding district heating, we will focus our plan mainly on expanding the existing network and connecting new clients on existing network, whereas we will analyze new areas and opportunity to invest in different municipalities, if the economic conditions will be there and contribution will be granted.
On energy, driven mostly by the renewable investment plan, 70% of total investments in this area will be focused on this area, whereas all the district heating and thermal will evenly share the rest of the investments. Overall, EBITDA will grow 5%, also taking into consideration the exceptional remuneration that we had in 2022 on production. On market, we will improve client satisfaction as a priority in this area. We are also giving an impulse to an expansion of energy clients, reaching 2.6 million clients, also leveraging on liberalization of the market that is planned in 2024.
We will also push for PPA agreements with clients in order to stabilize the relation to in a long-term fashion. Cross-selling of IrenPlus services, as reported in 2022, will be pushed even further, arriving to 40% target by the end of the plan. We will focus also on rebalancing acquisition channels, pushing and changing the push channels that have a higher churn and concentrate on pull, lower cost channel that habilitate clients to better contractual opportunities. Greater attention to customer satisfaction is part of the plan. In doing this, we will reinforce our networks of shops with new 42 new facilities. Increase the number of clients and the interactions that will be internalized with our personnel.
Most, almost EUR 90 million per year will be the investment in client acquisition that will be performed during the plan. This will lead to an average 5% growth in profitability, taking into consideration an average normalized profitability in 2022 that had, as said before, exceptional downturns. On Smart Solutions, the main focus of this business will be on energy communities that become a key success factor, both in the relation with our institution and with our clients. In particular, we have developed two types of model. The producer model, in which Iren is the owner of the plant.
The investment will be financed from the selloff of the energy, plus the interaction and the contribution from clients that will take advantage of the incentives by the tariff. The seller mode, in which Iren sells the plant, and then plays as the manager of the asset, software back office activities, charging a fee to the members of the communities. Also a key element of the development of smart solution will be the interaction with the public institutions with the renovation of public buildings, such as schools, hospitals, and public offices. Here, energy efficiency services are the key to tackle this kind of business.
Smart services such as security, parking, areas, access to limited traffic areas in cities, and integrated man-management of complex projects, such as public transport, for which we are going to develop public private partnerships. Normalized for the exceptional results in 2022. This business has a significant growth in a BDA of 10% on average during the plan. I will now hand off to Anna for the financials of the plan.
Thank you, Gianni. Looking at the evolution of our profitability across the plan, we see that both EBITDA and the net profit are expected to grow substantially by 2030, with target CAGRs at 7% and 9% respectively. This is in line with the previous plan. Similarly, also in line with the previous plan, both profitability metrics are expected to generate significant value already short slash medium term, with EBITDA expected and targeted to grow at an 8% and net profit at a 10% CAGR within the first four years of the plan.
The slight contraction of the net profit in the second half of the plan beyond 2026 is mostly a result of the overturned interest rate scenario, as we've all seen in the markets, which obviously contracts slightly our net profit in, as I said, in the second part. If we focus on EBITDA and its growth between 2022 and 2030, on the right-hand side of the slide, out of the EUR 800 million of value being generated across the plan, EUR 580 million will come from organic growth, i.e., from the development of renewables, the SOPs of the new waste plants, and the investments in water networks. EUR 170 million will come from inorganic growth, i.e., M&As, consolidations, and the participation to new tenders. Asset rotation will impact negatively for EUR 60 million.
This is, as Gianni already said, the sale of the Turbigo plant. EUR 100 million will come from efficiencies and synergies. While as for the energy scenario, we are expecting, first of all, a full recovery of the profitability of our market business unit, a normalization of hydro volumes and of pools, a contraction of the capacity market, and then a partial termination of our energy certificates. Overall, scenario and regulation will impact positively for EUR 30 million by 2030. Last but not least, we will continue to see a balanced growth of our EBITDA, with the share of regulated and semi-regulated activities expected to remain constant at around 70% across the plan. Moving to slide 33, we see the Net Debt evolution across the plan.
Net financial position will grow from EUR 3.3 billion at the end of 2022, as we already saw, to EUR 5.1 billion by 2030, mainly as a result of the investment plan Gianni went through in the previous slides, with net CapEx of EUR 9.5 billion. This figure here differs from the EUR 10.5 billion we saw earlier simply because this number here is net and net of the related contributions. This amount will be funded through the EUR 8.7 billion of operating cash flow generation you see in the chart, EUR 1.2 billion of equity injection, sorry, and asset disposals.
This is the sale of the Turbigo plant and then the equity contributions of minority financial partners into our gas distribution vehicle and to support the development of our renewables. This robust operating cash flow generation, if we co-focus shortly, the 8.7 is a result of the strong EBITDA growth we saw in the slide before, and then a continuous optimized management of our working capital. If we move to the next slide, the debt flow profile evolution on the left-hand side of the slide, net debt to EBITDA will remain flat and constant across the plan and always very well below the 3.4 times. This gives us obviously confidence in reconfirming our commitment in maintaining our current financial ratings with our two rating agencies, S&P and Fitch.
As for the average cost of debt, you see on the right-hand side, we start obviously from a very good position. We saw it at the beginning of the presentation. We closed 2022 with 1.6% average cost of debt. Obviously, compared to the 2021 plan, the interest rate scenario has completely changed, so we updated our assumptions here. As you can see, we will still maintain our average cost of debt below at around 2%, for the next 24 months. It's gonna gradually increase, reaching an average of 2.4% across the second half of the plan.
We feel this to be a very good objective and good result, and it will be achieved thanks through our high share of fixed rate debt, our strong and long duration. We will continue to have an optimized sourcing of our funding and always continue to tap sustainable finance resources. As you see here, we even expect to increase the share of sustainable finance from 76% at the end of 2022, even reaching almost 100% by the end of the plan. Moving to slide 35. Here we've summarized key elements which confirm the resilience and the low level of execution risk of our plan. First of all, our strategy is perfectly in line with EU directives and in particular with the related ESG standard, which by definition are obviously at no risk.
Gianni already said 80% of our investment will be sustainable and 75% eligible for EU taxonomy. On top of that, several strategic projects and several investments will be funded through REPowerEU resources. We expect, and we assumed in this plan, EUR 150 million of funds from REPowerEU. To date, compared to 2021 plan, we obviously have a much better visibility on this fund. Third, we will continue to invest on regulated assets. This is, as you very well know, the real main shield against inflation and interest rates. As Gianni already said, also here, we assume constant WACC across the plan, so any change in this assumption will obviously be an upside to the plan.
The plan, this updated plan is also with a limited execution risk, given a reduced amount of inorganic investment. This because we already fast-tracked several acquisitions and consolidations over the past 1.5 years. Plus, beginning of this year, we're also won important tenders in relation to waste collection service in Parma and Piacenza and to water service in Reggio Emilia. We also have a much better visibility on some of the investments embedded in this plan, especially in relation to the waste business unit. 80% of the incremental EBITDA by 2026 is linked to the SOP of new plans, which are either already authorized or in the process of being authorized. On top, 70 MW of renewable capacity will come on board by the end of this year.
We already have a pipeline of construction authorizations underway of more than 400 additional megawatts. Finally, we believe this plan to be less exposed to the volatility of the energy scenario. For example, because the renewables growth, as we saw in the previous slides, is strictly connected to the development of PPAs, also with clients. This will maintain our margins very well protected and constant across the value chain and will also help us reducing the churn rate at our clients. I would now hand it back to Gianni to go through our 2023 outlook and guidance and our closing remarks.
Thank you, Anna, and thank you everybody for the patience to be connected up to now. We, first of all, want to communicate the guidance for 2023. As you have seen, we have presented significantly and sound results in 2022 and a strong strategy that is confirmed for the future years.
In line with these two elements of strength, we are projecting for 2023 an EBITDA growth of 6% versus 2022, coming from the recovery of the profitability of the market view, the organic growth coming from waste plants that phase in and, of course, the growth in RAB, and the full availability of the thermal plants for this year, plus the full contribution of Sei Toscana for the full year. We also project above EUR 2.2 billion of investments, of which they include... I'm sorry, EUR 1.2. Yes. I'm optimistic. That include EUR 300 million of third-party investments and contributions.
We also project a very sound financial management as last year, that will project 3.3+ net financial position over EBITDA by the end of the year. This is also thanks to the cash-in of the sale of the minority stake in the gas network. Going to closing remarks, first of all, the strong performance this year enables us to confirm the dividend policy that we communicated the last year with a 10% growth since 2020, targeting EUR 0.11 per share for this year. This will be the proposal to the shareholders. The visibility of the future growth allow us to sail the targets of our plan with significant confidence.
This is because, taking advantage of the 2022 results and the fact that most of our initiatives come from internal development, with authorized investments. In additional, we presented to you additional opportunities that can be developed, finding financial partners that will bring added value to our strategy in the future. Thank you for the attention, I will leave the floor to Giulio for a Q&A session. Thank you, Giulio.
Welcome. We are now ready to take questions from the financial community first. Please follow the instructions from the operator.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, you can please press star one and one again. Once again, to register your question, please press star one and one and wait for your name to be announced. We are now going to proceed with our first question. The question's come from the line of Javier Suarez from Mediobanca. Please ask your question. Your line is opened.
Hi, good afternoon. Thank you for for the presentation and for the business plan update. I have several questions. The first one is on the supply activity that has been obviously, a difficult business unit in 2022. I think that during the presentation you mentioned a normalization in the profitability of this unit in 2023. I think that you mentioned changing hedging strategy and also a kind of the commercial promotion of new PPAs, contracts with your client base.
Can you elaborate for us on the lesson that has been learned on the commercial strategy of the company in 2022 impacting the new strategic path in 2023, and that is supporting that improvement in profitability for the supply division? That would be the first question. The second question, I have noticed the significant improvement in Net Working Capital in 2022, and also that the business plan is not assuming any working capital absorption through the plan. You can elaborate for us in the assumption behind this improvement in the working capital absorption that again has been paid for through last year.
The third question is, obviously the company is reflecting higher cost of financing, but the company is not affecting, if I'm not wrong, the assumption on remuneration for the networks. The assumption for the remuneration of the networks is for stability. You can help us to understand why the company has taken that decision. On the dividend policy, I notice that the dividend policy has been maintained to 2020, 25. While the range has been improved for the payout, if we position ourself in the middle of that range, in absolute terms, the dividend versus your previous guidance would be lower both in 2026 and 2030.
Do you think that that is a fair comment or a fair criticism or what would be the answer to that? The very final one is on the logic for the M&A activity. You have been mentioning the possibility of the commission in Turbigo also selling a minority stake on the gas distribution. The question here is a strategic one, which is the logic behind through exercise of an M&A strategy, what do you want to change from the profile of Iren moving into 2026 and then 2030? Thank you.
Thank you, Javier. I'll take a couple of questions and then I'll leave the others to Anna. First of all, what changes in supply versus last year? First, as mentioned in the presentation, we have changed the way we edged and we consider natural edging in terms of volumes, given the high variability that we need to expect on hydro volumes. For a significant share, we basically adopted a double edging strategy both on the value of hydro production and on the cost of sourcing of client consumption.
This is, will protect us in the future from, and this year specifically, given the fact that we are experiencing a significant drought also this year, this will protect us from the impact of this drought on the market, on the supply side. We also, by winning the recourse on the provision that was issued by the antitrust, we have been able, as all the rest of the market, but also the norm is supporting us. We have been able to reprice the clients that we projected to reprice last year. This also, of course, allow us to rebalance, particularly on electricity, the cost of sourcing versus the cost of delivery.
Of course, in a scenario in which cost of energy is reduced, the fact that we have higher pricing value recovers significantly margins. We are of course monitoring churn in order not to be impacted by this effect that has been significantly lower last year. We are also. What else on supply?
No, I think you said, you said it all.
Yes. On the working capital, we the closing of the year, given the fact that repricing was not possible, the supply business focused on rebalancing the payment deadlines versus the cash-in terms. This has led to a significant improvement in working capital. Restoring the negative contribution on working capital that was present before the crisis in 2021. This is the element that will continue next year, given the fact that the contracts that have been signed by the end of the year have a longer period of time duration.
I'm sorry. In addition, we have been able, as Anna was mentioning, to sell the working capital, the storage of gas before the end of the year. This has had an impact on working capital. We will not have a similar effect next year because we have participated to the tenders of Snam storage. We have already acquired all the storage facilities for 2023 that we need without having any impact on working capital. We are not expecting any change in this effect.
We also intersected the risk of having to write off the value of the storage by selling it before the market price of gas dropped during the winter.
Let me just add, Gianni, if I may, one thing, that, in any case, throughout the plan, we did assume a slight working capital absorption between EUR 200 million-EUR 300 million. In any case, with a decreasing scenario, as you might remember, also in the past, Eden has always benefited from a limited to none working capital absorption or actually working capital generation, especially at our market business unit. Throughout the ten, as I said, the scenario is gonna normalize gradually, and this will have a positive impact on our working capital. As Gianni was saying, we continue to benefit, as we saw even in a difficult year like 2022, Eden was able to benefit from very favorable payment terms from our suppliers, similarly to the past.
This will continue, also in the next years.
On the difference between the rising financial costs and the fact that we have not updated the regulatory returns, this is just taking into consideration the normal approach that we always applied to our business plans. As we did last year, where we presented the plan before the update of the WACC, and therefore we projected a similar WACC all through the plan. We are doing the same this year. We are projecting the same WACC that we have from regulatory business all through the year.
Basically, we are not betting on the review or the level of review that will be granted by ARERA in two years, and even next year, because we expect a review of WACC given the fact that interest rates have changed so much.
That's an upside.
Yes. This will be an upside. You can have make your own calculation on this. I think it's quite straightforward. The logic on M&A, and then I will leave the dividend answer to Anna. We are looking or we see a value in creating partnerships with professional investors that, of course, has two dimensions. First of all, contribution in capital can allow us higher investment rates, so to capture more growth opportunities, and it is straightforward. So to accelerate renewables, we are looking for a partner so that a business that is not able to generate by itself its own cash can be financed by external contributors.
We also see a value in partnering with professional investors in order to guarantee to all our shareholders that we have a sound financial approach in capturing investment opportunities and we are not investing to conquer any local authorities. This is definitely an approach that we will try to do develop even more. In addition, we have identified specific businesses in which we act as a developer itself. We generate the opportunity for investment, and we envisage this investment to be for third parties.
We see a market opportunity or actually, an opportunity to generate investments, sorry for the repetition, investments opportunities on regulated business that Italy is not as a market providing. In general, infrastructure funds are underinvested in Italian assets that are have normally a sound profitability. The ability of Iren to generate investment opportunities can be a source of value generation for our shareholders if we put it in place, and this will generate additional cash flow that is not projected in our business plan.
Yes. On dividends, the target was to maintain dividends in absolute terms unchanged versus the previous plan. Since the net profit, as you already spotted, and as we said, is going to contract slightly versus the old plan in the second part of the period, we revised the payout ratio accordingly to make sure that in EUR million, the numbers were gonna remain the same as the old assumptions.
Many thanks.
Thank you.
Once again, as a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Once again, it's star one and one if you have any questions or comment. We are now going to proceed with our next question. The questions come from the line of Emanuele Oggioni from Kepler Cheuvreux. Please ask your question.
Good afternoon. Thank you for the presentation. I have a few questions. The first one is on 2023 targets. You explained before that one of the main driver of the growth will be the recovery in the customer portfolio profitability. I'd like to check if I wonder if the BDA could reach at the 2021 level, so above from EUR 14 million to above EUR 100 million at least, or what else? What are the other positive or negative moving parts you are seeing in 2023?
In particular, as regards you already mentioned the hydro production could suffer the current drought in Italy, in at least in the west, north and west part of Italy, so in your core regions, the Western Alps. What is the expected volumes for the hydro production in 2023? Focusing on 2026 EBITDA targets, I noticed that compared with the old plan, there is a lower contribution from networks by some EUR 100 million compared with the previous plan. Could you explain why? Of course, I suppose also last year the also the old plan included the unchanged WACC in the along the plan period.
I noticed an increase in the generation business EBITDA from EUR 230 million to EUR 370 million. I wonder if you could detail, if you have more color on the breakdown of the generation business in 2026 in terms of organic growth, acquisition contribution, in particular in renewables, and the price effect, so the energy price scenario, compared with the previous target for generation business EBITDA in 2026.
In general, my question on 2026 targets, the other, the third question is on the organic CapEx and the organic EBITDA at the group level, not only I asked before for the generation business, also at the group level on like-for-like basis, so without acquisition, without further acquisition or consolidation in a waste business or renewables or whatever. Finally, a final question, if I may. Could you clarify these EUR 1.2 billion equity injections and asset disposals?
Compare with only €60 million of the EBITDA lost from the asset disposals. Thank you.
Yes. Thank you very much. First of all, a hint of the profitability that we target for the market is in a slide in the presentation, where we normalize the profitability at EUR 120 million. We expect, as a matter of fact, to recover the profitability, given the fact that we have a higher number of clients versus what was projected in the plan last year. We have recovered the individual profitability per kilowatt hour or per cubic meters of gas sold, and therefore we are able to extract more value. In general, higher prices with the similar marginality in absolute terms give a higher profitability.
This is more or less the trend. Of course, we have invested and we have a policy that reinforced at this point in time our hedging policies over 85%. We will be limitedly exposed to variation of prices from now on, but this is more or less what we expect on our clients. Of course, we are still exposed to climate, as you know. A mild winter determines lower consumption in gas and in industry heating, but that is something that we have to average out on a longer period of time.
On hydro profitability, as mentioned in our 2022 result, we had an impact of the reduction in hydro production that was EUR 85 million versus previous year. This was evenly split between generation and supply. On the supply side, as mentioned, we are not going to experience a similar impact because we have changed the quantities that we assume as natural hedging. Therefore, on the sourcing side, we have been more conservative on considering the production of hydro.
We are foreseeing a similar production of hydroelectric plants versus last year, in the range of 800 GWh in our projections, even though the rain that has been limited has been slightly higher than last year, even though the level of basins is much lower. Overall, the impact will be concentrated on generation. Given the fact that on average last year, prices of hydro was very low, considering the cap that was imposed on 50% of hydro production, we are expecting a slightly higher per unit price for kWh, so the impact should be lower than last year, and recover part of the profitability that we're expecting.
On lower network contribution, as said, last year, you mentioned EUR 100 million of lower contribution. Last year, we projected WACC 100 basis points higher than what is currently the regulation, with an underlying cost of capital and inflation on costs much lower. We are now on the flip side in the projections. We have included in our forecast increased operating costs due to increased inflation, higher cost of capital, but we have for all the period until 2030, a lower WACC. The delta is probably even split between the higher estimates that were in the plan last year and the lower estimates that we have in current plant, in plan.
I would add only one thing, but probably you spotted it, that last year in 2021 plan, district heating was within networks. There is also a change in, let's say, representation. District heating in this plan is within energy. If we take into account this change in, as I said, representation, I would say, having said what Gianni just commented, the changes are negligible, I would say. I mean, the network's EBITDA is very much in line with the old plan.
Okay.
Yes, I would yeah. On the EBITDA growth between 2022 and 2026, your question in relation to the organic portion. Organic growth is a little bit less than EUR 200 million. This is compared to EUR 580 million over the eight-year period. The inorganic portion is around EUR 80 million compared to EUR 170 million until 2030. The contribution of the scenario, on the other hand, is much higher in the first part of the plan, obviously, because the normalization of the energy scenario comes more towards the second part after 2026.
Organic CapEx?
Organic CapEx, I'll come back to you.
Okay.
You wanted to comment to the EUR 60 million.
No, the equity contribution.
Exactly, the EUR 60 million. The reason is, the sale of Turbigo is a sale of 100%, obviously we will deconsolidate also the related EBITDA after 2026. While the entrance of the minority partner in into the gas distribution vehicle and into the renewable SPV and the new renewable newco is gonna be for a minority stake, we will continue to consolidate the EBITDA also after the entrance of the minority investor.
I would assume that the EUR 1.2 billion are a combination.
Yes
... external contributions.
Correct.
So, um-
Equity injections.
... and equity injections.
Yes.
Correct.
Equity injections, and then the disposal of, the Turbigo plant.
Okay.
Obviously, you mean the upfront cash-in, and then, the continuous support of, after, also after the entrance, also through equity, further equity injections, yes. On the organic investments.
Thank you, Cecilia.
... I'm sorry we don't have the number now until 2026 off the top of our heads, but Giulio will provide you the figure after this call.
Thank you. Thank you so much.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Roberto Letizia from EQUITA. Please ask your question.
Thanks. Good afternoon. Thanks for taking my questions. If I can stay for a while back on Hydro. Pleased to hear that you got already a very conservative assumption, but I am a bit confused on the fact that you also mentioned some different way of hedging between the sides of your business, supply and generation. I was actually wondering what happens if instead we recover, well, finger crossed we will not go below that, but in case we recover some 10% or even more production on the Hydro side. I wonder if we get improving through the year on the Hydro production, do you get the benefit? Or because of the fact that you hedge everything to avoid any volatility from prices and availability of Hydro, you don't get any benefits on that?
Can you just let us understand how it works in 2022, which seems to be a bit different for everyone, trying to protect against this volatility element. Can you give us some more visibility on when do you expect minority gas to be disposed? Just a little bit of timing on how this components are going to happen in the plan. Just wondering if you could give us some visibility more on how much renewables you expect to install in 2023 and 2024, just as to have a sense on the short-term quality of the pipeline that is going to be added in the next year's very short term.
A detail on the impact from the derivative on the change of the indexations from ARERA, the 21 million that you reported as a negative impact this year. Just wondering if this is gonna happen also in 2023, or by the way it is built up now, you're full up and running with the new indexation, and we are not gonna have this minus EUR 20 million on profits, on interest rates, sorry, in 2023. Thanks a lot.
On hydro hedging, maybe I had to clarify better. We were assuming a great part of the volumes, netting them from the consumption in order to take into account the natural hedging elements. We have now decided to limit the amount of hydro production that is naturally hedged with clients' consumption, and to decouple the hedging. We have two hedging contracts. One on the sale and the margin on hydro production, which will take into account volumes that are lower than the one that on average you estimate.
And on the other hand, um, uh, clients, uh, the, the supply, uh, business has a higher share of sourcing that is hedged, uh, from market prices, uh, uh, and so assumes, uh, purchase of energy from the market with, uh, uh, an hedging contract as a, a backup.Is a, a, um, a, a stabilizer of the, uh, oscillation of the prices. So, i-in this case, uh, uh, if we have, uh, a, a reduction of consumption... uh, overproduction, uh, o-on hydro, uh, we will not have, uh, uncovered, uh, clients that, uh, we need to, um, uh, source, uh, energy for. And we, uh, can take a full advantage actually of, uh, extra production of hydro that, uh, is not edged and therefore, uh, can, uh, can deliver mar- full market price if, uh, it comes. So we are still, uh-
Basically the upside and downside is just linked to the pure margin of a pure hydro margin of a single additional or negative megawatt from hydro, is that correct? No market risk on it?
Maybe I didn't understand.
No, just mentioning if I get one megawatt hour more from hydro, I get fully the pure hydro margin on that megawatt hour.
Yes.
I don't have coverage risk because you changed the hedging policy.
I don't have. I have a full upside for extra production of hydro.
Okay, great.
Of course.
And the inaudible-
We are praying for rain every day.
Oh, yes. Actually just to be sure, of course, I do every day. Just to be sure, Just asking to repeat it to you. You assume flat hydro production this year?
We assume 800 gigawatt hour of.
Perfect. Thanks. Thanks.
It's not... It's a slight increase, but very, very small. On gas disposal, we are projecting at the end of the year as the finalization of the contract. The closing. On P4, we, this is a totally exceptional measure. Is, of course, we covered all our position. There is a policy in here that we cannot, of course, neglect. We covered all our winter positions with P4. That was the index that for regulated businesses was driving the tariff. This for us works for all gas contracts that are on the regulated or regulated clients, and for all the heat consumption.
It's very important for our supply side. The authority in August changed the, terminated the contract.
The index.
The index. We have reported the loss on that derivative, that it doesn't have any more, any real asset as a counterpart. In part on the EBITDA for around EUR 40 million. That is to take into account the fact that from the moment in which we signed the derivative, to the moment in which the authority decided the change of the index. Even though no gas was consumed, the spot price, of course, changed, and therefore the mark-to-market value of the derivative changed. This is more or less a EUR 40 million of exceptional loss on EBITDA that we have reported this year.
Plus, we have a part which is the variation of the index after August, that is reported as a financial impact, extraordinary financial impact below the line. That is the variation of the same index after August to the end of the year. We are not expecting any additional impact this year of this variation.
The derivatives are resolved at the end of last year, so they were fully executed.
Yes.
In December. I mean the Q4, so they resolved within December.
Basically 23 interest charges theoretically will benefit from up EUR 21 million...
Yes.
Positive comparison.
Correct.
On the bottom line, plus, EUR 40 million on the EBITDA.
Of course. Of course. Yes.
This is an important point, if I may, because it was a long debate, with our auditors, and in the end we agreed that until the termination, as Gianni was saying, at, of the index, the value of the derivative, was gonna impact the EBITDA because it was still effective then. Until it was terminated, it became no longer effective. We were able to at least account EUR 21 million below EBITDA. This is a gray point, because the full impact would have been is actually EUR 60 million, but, forty-
The underlying asset disappeared in the moment in which the authority decided the change of index. You have a derivative with no commodity-
Underlying.
No, no underlying. Therefore, for us is a totally financial investment. We adopted this conservative approach that impacts both the EBITDA, so the operational activity and the financial activities. It will be, of course, both of the impact are exceptional.
Renewables?
On renewables, we are projecting in 2023, 215 megawatt. In 2024, 300 megawatt. In 2025, 600 megawatt of installed capacity. I think we answered to all of the questions.
Yes. Thanks. Thanks a lot.
Thank you.
We have no further questions at this time. I hand back the conference to you for any closing remarks that you may have. Thank you.
Well, thank you for the patience. It was a long call, but I think we have tried to explain the results and to deliver the value of the program of investments that we have that we are projecting. I believe that we will deliver significant results in the future in line with 2022 performance. Thank you very much.
Okay. Thank you.
Let me thank all the investors and analysts connected. I'll be available for any follow-ups that you wanna have. Now let's have a five minutes break. The management will be available for journalists.