Good afternoon, and welcome to the presentation of Iren Group's Industrial Plan. The presentation will be delivered by Executive Chairman, Luca Dal Fabbro, Chief Executive Officer, Gianluca Bufo, and CFO, Giovanni Gazza. At the end of the presentation, as usual, there will be the Q&A session. I will now hand over to Luca to take us through the details of our new plan.
Thank you. Good afternoon to everyone. Also my side, and thank you for joining us for the presentation of our industrial plan. Let us start with the strategy section on slide three, where we look back at what we have achieved over the past few years and outline the strategy we intend to pursue over the coming decade. Over the five-year period from 2021 to 2025, we strengthened the group's organization, the skills of our people, our processes, and our collaboration with our supply chain partners.
This enabled us to build the capacity to deliver on average approximately EUR 1 billion of investment per year. These investments supported average annual EBITDA growth of 8% and a profit attributable to group growth of almost 5%. At the same time, we maintained a sound financial structure, which enabled us to weather the shocks of 2022. The sharp increase in energy prices accelerated inflation and resulting rising interest rates. Today, we are facing some of the same challenges as 2022. Geopolitical tensions and energy shocks are putting renewed upward pressure on commodity prices, prompting central banks to raise interest rates. Our role as a multi-utility is to support processes that make Italy more resilient and self-sufficient in an increasingly complex environment, and volatile. This is our renewed commitment for the coming decade, to focus our resources on strategic infrastructure and on areas where we have distinctive capabilities.
We want to improve the quality of the services we provide to citizens and communities while combining industrial development with a continued focus on group profitability and financial strength. Looking at the new slide, and looking back at the key milestones in the strategic journey we have built over the recent years, it is clear that the plan we are presenting today represents a consistent evolution of the strategic platform first established with our initial 10-year plan in 2021. Since then, we have maintained three pillars designed to guide the group's long-term development. The energy transition, the creation of value in the communities we serve, and improving service quality. These pillars remain fully relevant in the next 10 years and continue to guide our industrial decisions, the allocation of investments, and Iren's positioning in essential services.
In 2025, we took a second, equally important step, making our business model more focused. We moved from an extended multi-utility model, characterized by a broad range of activities, to a focused multi-utility model, reflected in our capital allocation decisions. Our aim is to be more selective in our investments and more disciplined in pursuing profitability. With the 2026 plan, we are taking the next step, but we remain coherent. We translate the sharper focus into concrete growth objectives, operational excellence, and the strengthening of strategic infrastructure. Together, these two strategic levers define our ambition for 2035. To evolve progressively from a focused, local multi-utility into an infrastructure player of national significance. Combining our close ties to local communities with a greater scale, a strong industrial presence, and progressively higher returns.
We are reaffirming our identity while making our direction clearer, our investment decisions more selective, and our ability to turn investment into service quality, growth, and valuation stronger. I will now hand over to Gianluca to take you through our new group objectives in greater detail.
Thank you, Luca, and good afternoon to everybody from me as well. When we talk about operational excellence, we mean the ability to turn the quality of our operations into a real industrial advantage. One that customers can recognize and that can be measured in our financial results. Our approach has two closely interconnected dimensions: service quality and profitability. The first concerns the quality with which we manage our infrastructure in the central services. Our goal is to make our assets more efficient, resilient, and fit for future challenges while delivering tangible improvements in service.
To this end, we measure performance using the operational indicators shown on the slide, and these go beyond the purely technical metrics and reflect our ability to eliminate inefficiencies, improve reliability, and sustain the quality of our results over time. The second dimension is profitability. Here we will focus on three levels: efficiency and synergies, digitalization and artificial intelligence, and the productivity of invested capital. We will continue along the path already underway, with cost management initiatives targeting EUR 2 billion in adjustable costs, organizational simplification, and process optimization. By 2030, we will redesign approximately 40% of our IT processes through digitalization and AI. Finally, greater selectivity in investment, a reduction in non-productive capital, and the full realization of value from our assets will increase ROI from 6.7% in 2025 to 10% in 2035. The key point is that quality and profitability are not separate objectives.
More efficient assets reduce costs and improve service. More digital processes boost profitability and control. And better execution allows us to realize the benefits of investments sooner. This is a from efficiency as a series of individual initiatives to operational excellence as a distinctive and structural capability of the group. Our increasingly focused strategy translates into concrete capital allocation decisions. We are prioritizing businesses where we already have a strong position and can leverage our industrial science to generate sustainable long-term returns. We have identified three priority infrastructure platforms to which we will allocate 50% of total investments. First, in the water business, we will invest EUR 2.4 billion to modernize networks, expand wastewater treatment capacity, and protect a resource that is becoming increasingly scarce and valuable. Our aim is to reduce the network losses and improve overall service quality.
We will take action across the entire water cycle, leveraging technological advances, particularly in wastewater treatment, and using artificial intelligence to detect leaks. Second, in electricity distribution, we will allocate EUR 1.4 billion to develop more efficient networks, including through the construction of new primary substations. Our goal is to improve the reliability of the local electricity system and ensure greater continuity of service, in a context of increasing electrification and the adverse effects of heat waves on electricity network operations. Finally, we will invest EUR 1.2 billion in the construction and upgrading of four WTE plants. This will help the communities we serve become more self-sufficient in waste treatment and reduce landfill disposal in line with the European regulations. These two infrastructure platforms address different needs, but they follow the same underlying logic, increasing infrastructure reliability and self-sufficiency in the areas we serve.
Focusing investment on selected activities is a response to structural needs within Italy's infrastructure. This slide compares the country's infrastructure gap in each area with the specific measures set out in our plan, confirming our focus on the businesses we have just discussed. Let us start with water. Italy's national water system loses approximately 2.4 billion cubic meters of water every year, equivalent to the needs of 43 million people. This figure immediately highlights the economic, environmental, and social significance of the problem. As mentioned, Iren has allocated EUR 2.4 billion to the water business, and it plans to replace approximately 1,700 km of network. Our objective is to reduce water losses by 70% by upgrading obsolete infrastructure, strengthening monitoring, and improving overall operating efficiency.
Turning to electricity distribution, according to ARERA data, the average duration of power outages in Italy in 2024 reached 76 minutes per customer, up from 61 minutes registered in 2006, despite average annual investment nationwide of approximately EUR 2.3 billion. These figures highlight the need to further strengthen networks, making them more reliable and better equipped to support electrification, distributed generation, and climate change. Iren's response involves EUR 1.4 billion in investment and the construction of six new primary substations, increasing available capacity by 60%. The third area concerns WTE plants.
To achieve national self-sufficiency and meet the European targets for reducing municipal waste sent to landfill, Italy needs approximately 6.5 million tons of additional waste treatment capacity. This is equivalent to around 32 new WTE plants, each with a capacity of 300,000 tons each. Iren intends to make a concrete contribution towards closing this gap through EUR 1.2 billion investment.
Four WTE plants and approximately 1.1 million tons of additional annual capacity. This program will double our capacity, increase the infrastructure self-sufficiency of the communities we serve, and convert a greater share of waste into energy. I will now hand back to Luca to conclude the strategy section.
Thank you, Gianluca. Overall, our investment program is designed to maintain a disciplined balance between growth and value protection, developing new infrastructure, preserving the efficiency of existing assets, and progressively improving the group's risk and sustainability profile. The plan provides EUR 10.4 billion in investment over the 2026-2035 period. 2026-2035, equivalent to more than EUR 1 billion per year. This is a substantial program, not only in terms of size, but also in terms of capital allocation. And it is fully consistent with the strategic focus outlined earlier. Investments will be distributed relatively evenly over the 10-year period.
We foresee EUR 5.1 billion investments planned for the first five years and EUR 5.3 billion investments for the period 2031-2035. Over 80% of investment will be concentrated in three business units with the strongest infrastructure focus. 42% in networks, 21% in environment, and a further 21% in energy. Market and corporate quota will each account for 8% of the total. In terms of risk profile, 72% of investment will be allocated to regulated or semi-regulated activities. This improves the visibility of returns and reduces the group's overall exposure to market volatility, making the growth expected under the plan more predictable. The nature of the investment is also balanced. 45% will be allocated to development, while 55% will go towards maintaining and renewing existing assets. We are therefore supporting both the expansion of our industrial base and its quality, safety, and efficiency of the assets already in operation.
Finally, 72% of investment is classified as sustainable, confirming the strong alignment between our capital allocation and the group's transition objectives. This slide shows the overall amounts. The EUR 10.4 billion of investment envisaged under the plan supports a solid progressive and financially balanced growth trajectory. As in the previous five-year period, this demonstrates that our industrial ambition is fully compatible with financial discipline. We are therefore presenting not only a substantial investment program, but a pathway in which industrial development, earnings growth, and financial discipline reinforce one another. Let us start with EBITDA, which will increase from EUR 1.353 billion in 2025 to approximately EUR 1.6 billion in 2030, and around EUR 1.95 billion in 2035, with a CAGR of 4%. This amounts to almost EUR 600 million of additional EBITDA over the decade, driven by the gradual commissioning of growth investments and improvements in operational efficiency.
Growth will be gradual, visible throughout the plan period, and supported by a portfolio increasingly concentrated on infrastructure base, regulated, and semi-regulated activities. Net profit is expected to grow even faster. It will rise from EUR 301 million in 2025 to EUR 385 million in 2030, and approximately EUR 450 million in 2035. Net profit growth outpacing EBITDA reflects operating growth, driven primarily by development investment and efficiency gains, despite higher financial expenses associated with the rising interest rates. Financial leverage will remain at 2.1x during the initial phase of the plan, fall to 3x in 2030, and reach 2.8x by 2035. The net debt to EBITDA ratio will therefore remain comfortably below the 3.5x threshold, consistent with maintaining a strong credit profile and our current credit ratings.
This will enable us to finance organic growth, support our dividend policy, and retain the financial flexibility needed to pursue further organic and inorganic growth opportunities. In this slide, we talk about the Industrial Plan. The Industrial Plan is accompanied by an updated Sustainability and Transition Plan extending to 2040. It foresees a longer period of time. This long-term horizon is consistent with the investment cycles of our businesses and with the environmental social impacts that unfold over time. We have defined our medium and long-term targets based on scenarios that we consider credible and challenging, prioritizing pathways that are more likely to be achieved. Our aim is to set an ambitious, yet practical and measurable trajectory. Measurable and consistent with the expected evolution of the sectors in which we operate.
More than 72% of investment in the 2035 plan will be allocated to projects supporting the transition, amounting to EUR 7.6 billion in sustainable CapEx. In addition, 62% of total investment will be aligned with the EU Taxonomy. These figures demonstrate that sustainability is one of the key factors through which the group focuses its investments, strengthens its asset base, and creates long-term value. From a strategic perspective, we are confirming our five focus areas, allocating approximately EUR 2.3 billion to water resources, EUR 2.6 billion to resilient cities, EUR 1.4 billion to the circular economy, and EUR 1.2 billion to decarbonization. Our focus on people cuts across all four investment areas, as shown in the chart. Industrial transformation requires new skills, safety, innovation capabilities, and an organization able to support the group's technological evolution. I will now hand back to Gianluca for a view of the action plan.
Turn to specific initiatives for each business unit. Let us start with networks. We have a clear priority here, turning investments into tangible improvements in service quality. The plan allocates EUR 4.4 billion to more resilient infrastructure, more digital and more efficient. Comprising EUR 2.4 billion for the water cycle, EUR 1.4 billion for electricity distribution, and EUR 600 million for gas distribution. Alongside investment in physical assets, we are also planning to digitalize our activities through initiatives such as smart meter installation, remote monitoring, and network districting. These measures will enable us to anticipate issues, respond more quickly, and manage our assets more precisely. In the water business, we support the renewal of networks and facilities with the aim of reducing water losses from 31.4% in 2025 to 26%.
We will also allocate almost EUR 300 million to four new wastewater treatment plants, which will increase treatment capacity by approximately 500,000 population equivalents by 2030. In addition, we will modernize two existing plants and carry out structural upgrades to two reservoirs used to store drinking water. In electricity distribution, we will invest to accommodate the growing demand for power and halve the duration of power outages.
We will build six new primary substations and upgrade two existing ones, increasing install capacity by 6%, while digitalizing our entire substation fleet. In gas distribution, we will maintain a selective approach focused on safety, the replacement of non-compliant materials, and digitalization, with the aim of preserving our already excellent service levels. Structural EBITDA growth in this business unit, averaging 5% per year, is supported by a 30% increase in the regulated asset base or RAB by 2030, and a 70% increase by 2035.
In 2030, results will also benefit from this energy program. Our projections assume continuity of the current concession perimeter constant WACC throughout the plan period. In the environment business unit, the next slide, our aim is to strengthen our role across the entire value chain, from waste collection to material and energy recovery. The plan provides for EUR 2.2 billion in investment, 71% in waste treatment and disposal, and 39% in collection. In waste collection, we are confirming the current concession perimeter and continuing to digitalize and optimize the processes and assets with the aim of increasing the separate collection rate by 3%. Thus improving the quality of waste streams and the value of materials that can be subsequently recovered. Waste treatment and disposal is where we are targeting the most significant step change in our industry capabilities.
We plan to deliver four waste-to-energy plants, two new plants, each with a capacity of 400,000 tons, and two revamping projects, TRM, with a capacity of 250,000 tons, and Poggibonsi in Siena, with a capacity of 40,000 tons per year. Together, these projects will provide more than 1.1 million tons of additional waste-to-energy capacity on top of our existing capacity of 900,000 tons per year. We also plan to build two new plants for the treatment of liquid waste, particularly leachate generated by landfills and organic waste treatment facilities, as well as a dedicated plant for treating the ash produced by waste-to-energy plants. These investments will extend the waste value chain. As a result, the volume of waste treated will increase from 2.8 million to 4.8 million tons, and the energy sold by our waste-to-energy plants will more than double by 2035.
This growth will increase the infrastructure and sufficiency of the communities we serve, reduce reliance on less sustainable solutions, and strengthen our ability to create value at every stage of the waste cycle. This industrial expansion will be reflected in business unit financial performance. In the first phase, EBITDA will rise from EUR 277 million in 2025 to approximately EUR 330 million in 2030, representing a CAGR of 4%, supported by the plans for organic municipal waste treatment and material recovery, reaching full operating efficiency. Looking ahead to 2035, EBITDA growth will average 6% per year, driven by a EUR 150 million contribution from the four waste-to-energy plants, which are expected to be fully operational in 2032, 2033. Moving on to the energy business unit, we are pursuing a selective strategy, investing where we have distinctive assets, adequate returns, and a clear industrial role.
The plan allocates EUR 2.2 billion to the expansion of district heating and to maximizing the value of our strategic generation assets. District heating is our main area of development. We will invest EUR 700 million to extend the network, particularly in Turin, making full use of our available heat production capacity, which will be supplanted by the fourth line of TRM waste-to-energy plant. We will also build a new district heating plant in Alba, upgrade our cogeneration facilities, particularly Reggio Emilia and Genoa, and add more than 7,000 cubic meters of thermal storage capacity. The volume served will increase from 150 million to 140 million cubic meters, bringing tangible benefits for urban air quality.
In hydropower, we will invest EUR 650 million in safety and efficiency, based on the assumption that the concessions will be extended under the so-called Fourth Way, which we hope the European Commission will discuss in the coming months. We will also develop approximately 8 MW of new small hydropower capacity and build a 48 MW pumped storage system, which is expected to become operational during the second half of the plan period. In photovoltaics, we are slowing the development of new capacity, partly because of increased competition that we have already seen and we expect in the FER X bids. We have therefore allocated EUR 70 million exclusively to completing projects already under construction, representing 62 MW of new capacity. Of this total, only 8.5 MW has been operational since March 2026, while the remaining 54.5 MW is expected to be operational from 2028.
We maintain a strong presence in thermal and CCGT generation, which are essential to ensuring system security and flexibility in the context of electrifying consumption and growing demand, including demand arising from the development of data centers. The two new air cooling systems at Turbigo and Moncalieri will enable the plants to operate from 2028, even in draft conditions and when water availability in irrigation channels is reduced, while taking advantage of the positive margins typically seen during the summer months. The plan also includes a contribution from connecting a data center located in one of our thermal power plants. This will follow our CapEx-light business model, with Iren primarily supplying electricity and making use of the heat generated by the data center's cooling systems.
Finally, in energy efficiency, we are focusing on renovation projects for public sector buildings and the opportunities offered by the incentive scheme, Conto Termico 3.0. It's a diversified portfolio spanning hydropower, photovoltaics, flexible generation and heat that strengthens our resilience to price volatility. This generates approximately 20% of the business unit's EBITDA is generated by semi-regulated activities. Overall, EBITDA will increase from EUR 278 million in 2025 to EUR 365 million in 2030, with a CAGR of over 5%. Growth through 2030 will also be supported by higher capacity market revenues following the interaction of the new air cooling systems, the expansion of the district heating network, higher thermal power generation, and heat spark spreads that are expected to average above 2025 levels. We estimate a stable contribution from the ancillary services market of EUR 15 million-EUR 20 million per year.
We expect Italian CCGT clean spark spread price to decline progressively before stabilizing at around EUR 100 per megawatt per hour from the second half of 2028, and we also expect that heat spark spreads to remain in line with those reported in recent years. Looking further ahead, EBITDA is expected to reach EUR 390 million by 2035, representing a CAGR of 2%, driven mainly by higher heat sales as the district heating network expands. Finally, the market business unit, where we expect to keep our customer base fairly stable at 2.3 million customers, while increasing the number of services sold, improving the quality of our offering, and expanding cross-selling, thereby increasing the value of each customer. In recent years, we have built a strong organizational and commercial platform capable of supporting and increasing the product portfolio of products and services, and diversifying our sources of value creation.
Our model is lean and scalable, combining the proximity of our physical stores with the effectiveness of digital channels, enabling us to stay closer to customers and respond quickly to their needs and to changing scenarios. Building on this foundation, over the coming decade, we will accelerate operational efficiency, leveraging digital tools, and further integrating artificial intelligence across a wider range of processes. Our aim is clear: to make customer interactions simpler, more effective, and more immediate while developing increasingly personalized offers. With the customer base remaining stable, we expect the average electricity consumption to rise from 2.9 to 3.1 MWh per customer, while gas volumes will decline as unit consumption falls. At the same time, we maximize the value of customers moving from the regulation services to the free market, and strengthen our inbound channels and store network.
Our commercial offering will continue to combine fixed price contracts with annual or multi-year terms and variable price contracts. The right balance between these two types of offer will be driven by our objective of minimizing risk and by end market preferences. We expect customers to increasingly favor multi-year fixed price contracts in order to reduce exposure to volatility. Iren Plus and bundled offers, combining energy, connectivity, insurance, and home solutions, will play a central role in our product portfolio. The number of Iren Plus customers will increase from 434,000 to approximately 585,000 by 2035. This will strengthen customer loyalty. These are separate from the customers we consider on the energy side. This will strengthen customer loyalty, increase service presentation, and help us build broader, longer-lasting customer relationships with the aim of containing churn rate over the plan period.
EBITDA will decrease from EUR 269 million in 2025 to EUR 235 million in 2030, representing an average annual decline of 2%, mainly due to the normalization of margins and lower gas volumes. Electricity profitability will remain stable at around EUR 140 million, and the contribution from Iren Plus and other services will increase from EUR 11 to EUR 15 million by 2030, reaching EUR 20 million by 2035, offsetting the lower profitability of gas customers. On synergies, as you can see on this slide, we are continuing the program launched in 2024 with a track record of delivering EUR 20 million in synergies every year. With this plan update, we have further strengthened our target, our target for 2030, increasing it by approximately EUR 30 million. The higher target reflects a dedicated project carried out by an internal cost management task force.
Over the past year, the task force has mapped and reviewed external costs across every group function and business unit, identifying approximately 150 improvement initiatives across eight areas of intervention. Based on an addressable cost base of more than EUR 2 billion, the transformation program also relies on digital tools and artificial intelligence, process reorganization, insourcing, corporate simplification, and effective management of generational turnover. With these slides, I would like to go into greater detail on the main actions already implemented, and those planned to transform the group.
First, we are transforming our corporate processes by leveraging digital tools, automation, and artificial intelligence to simplify activities, increase productivity, and progressively reallocate resources toward higher value-added activities. This also means not fully replacing employees who leave through retirement. Currently, nine projects are already underway, and a further 15 projects have been identified for possible launch in the short term, involving several functions.
By 2028, we expect the projects already launched to generate cumulative synergies of more than EUR 9 million. We are also extending digitization to the operational activities of our business units with the aim of improving profitability, increased productivity, and preserving and developing technical skills. We expect benefits from automating 10%- 15% of working hours that can be automated. Our project already implemented involved applying AI to customer service activities, within Iren Mercato. It involved 950 operators and delivered a 70% increase in productivity, with a 97% rate of correct responses, while also improving service quality. The creation of centers for excellence will allow us to centralize cross-functional activities, make better use of expertise, standardize processes and systems, and reduce inefficiencies arising from duplication.
This approach has already begun with the consolidation, simplification and engineering, and empowering of engineering functions within the networks environment and energy business units, and can subsequently be extended to other functions. Finally, we will manage generational turnover at both management and operational level, turning the natural flow of departures into an opportunity to renew skills and professional capabilities, while preserving the group's existing know-how. Let me express thank to the new directors of the business units, Networks and Environment, and the new director of the business unit, Market, and to the people that are leaving the group on the 30 of October. Thank you very much from all the group for everything you did over your long career. Overall, this transformation will enable us to support the group's growth with a leaner, faster, and more forward-looking organization.
Let us now turn to the financial indicators on slide 19. We can see how the planned investment will drive margin growth throughout the plan period, with EBITDA expected to grow, and group net profit growing at 6% through 2025. This good trajectory is underpinned by regulated and semi-regulated activities, which will account for 80% of the portfolio of our best energy plants come into operation, and our investments in networks take effect. Focusing on the period through 2030, we confirm average annual EBITDA growth of 4%. The share of regulated and semi-regulated activities will remain broadly stable at 75%, as growth in the activist business unit is complemented by higher profitability from thermal power plants, supported by the already evident progressive increase in demand. In particular, between 2025 and 2030, group EBITDA will increase by EUR 250 million, as a result of the following factors.
First, organic growth will contribute EUR 100 million, supported by higher allowed revenues in the networks as the regulated asset base grows. The full operation in the environment facilities for material recovery and organic municipal waste treatment and expansion of the district heating network. The organic growth contribution is primarily associated with EUR 2.3 billion of development investment planned for 2026/2030.
This is also due to the growth of synergies already described, which will contribute EUR 130 million. We expect the energy scenario to have a broad neutral impact. Our assumptions include an Italian wholesale electricity price of approximately EUR 100 MWh in 2030, down from 2025 levels, and a hydropower generation of 1.2 terawatt per hour are positively sparked by the poor thermal generation, high thermal generation volumes, capacity market revenues of around EUR 110 million, and a contribution of approximately EUR 30 million from the ancillary service market.
Regulation will also make a small positive contribution, as the recovery inflation in the operating costs of regulated businesses will more than offset the expiry of green certificates for hydropower and waste to energy plants. The plan assumes a cost of the WACC for regulated business throughout the entire period. Finally, as already highlighted in the first half of 2026, we expect margins in the market business unit to normalize. This reflects lower consumption propensity among gas customers and lower unit margins compared with the 2025 actual results. Before moving to the next slide, and with the current year now drawing to a close, we believe it is appropriate to provide some near-term guidance for 2027. We expect the EBITDA to grow by 3%-4% compared with our 2026 guidance.
Slide 20 summarizes one of the key elements of the plan, the progressive improvement in group profitability as we complete the investment cycle initiated in previous years. We start from an ROI of 6.7% in 2025 and aim to reach approximately 10% by 2035. This is a significant improvement, driven not by a single initiative, but by a combination of different industrial, operational, and financial levers, whose effects will progressively reinforce one another throughout the plan period. In the short term, the first lever is efficiency. Our cost management program will enable us to improve operating performance and extract greater value from our activities. This will be complemented by the group structural transformation and the optimization of our processes through simplification, digitalization, and the increasing use of artificial intelligence. This journey is already underway and has accelerated significantly over the past 12 months.
It will continue throughout the plan period, with the greatest benefits expected to begin materializing from 2028 onwards. There is a progressive ramp-up of the substantial investment cycle across our infrastructure businesses. Networks will continue investing steadily throughout the planned period from 2026- 2035, while the main development phase for WTE plants will take place between 2029 and 2033. As these investments come into fruition, the capital deployed will begin to contribute fully to growth in results and profitability towards 10%. Finally, we will focus on the equity and productivity of invested capital. We do it every day. In 2026, we have already reduced net circulating capital by selling receivables relating to the Superbonus and Ecobonus schemes.
Over the longer term, the gradual commissioning of assets currently under construction, and the reduction of D&A components in regulated businesses will help reduce the share of invested capital that is not yet productive. Lastly, but Luca will explain it better, beyond the plan's base case scenario, we will also retain the option to realize value from non-consolidated equity interests and assets belonging to businesses that we do not consider strategic. I will now hand over to our CFO, Giovanni, to review the financial figures.
Thank you, Gianluca. Good afternoon to everyone from me as well. Commenting on this slide, I would like to emphasize that as in previous plans, financial discipline underpins the Iren Group's entire growth trajectory. In particular, the net debt to EBITDA ratio will not exceed 3.1x .
It will progressively decline to 3.0x in 2030, and 2.8x by the end of the plan, providing a significant financial flexibility buffer against our 3.5x cap. By 2030, cumulative operating cash flow will amount to EUR 5.2 billion, fully covering the EUR 4.8 billion of cash outflows planned for net investment during the first five year period. The remaining operating cash flow will also finance almost 40% of dividend payments. Overall, between 2025 and 2030, the absolute increase in debt will be approximately EUR 700 million. As regards net circulating capital, we expect it to increase through 2028, followed by a reduction from 2030 onwards. This decline in net circulating capital reflects the gradual unwinding of so-called extra-cap components associated with the investment in waste collection and water work business. These components are not immediately recovered through bill tariffs.
I will conclude with a closer look at the cost structure of our debt. The average cost of debt currently stands at 2.4%, also thanks to a significant proportion of fixed rate debt, which accounts for 95% of the total. As maturing bonds are financed, we expect the average cost of debt to increase progressively. More specifically, we expect it to remain below 2.8% in 2027, 2028, with approximately 3% in 2029, 2030, and subsequently rise to around 3.2% after 2030. Our objective is to maintain an average debt maturity of approximately five years. As shown in the chart at the top right, our debt repayment schedule is well distributed over time. This enables us to optimize the maturity and the cost of our funding mix, including the balance between bond issues and bank financing. I will now hand back to Luca for the closing remarks.
Thank you, Giovanni.
As we approach the end of our presentation, we confirm a solid, feasible and sustainable dividend policy through 2030. The expected growth in our operating and financial results will allow us to increase the dividend progressively. We start from a dividend of EUR 13.86 per share in 2025, and expect to reach EUR 19.2 in 2030, with average annual growth of 8% in the initial years of the plan, and 6% in the subsequent period. This trajectory reflects our ability to balance three objectives: supporting a substantial investment program, preserving a balanced financial structure, and at the same time, ensuring steady and attractive growth in shareholder returns. The dividend policy we are presenting today is also consistent with the predominantly regulated and resilient nature of our business portfolio, providing investors with a high degree of visibility over the medium to long term.
Let us now turn to slide 24, which covers the strategic options not included in the base case of the plan. These are initiatives identified through our ongoing process of research and assessment, for which we do not yet have sufficient visibility or which require further technological readiness or maturity. As visibility improves, these options are progressively incorporated into the base plan, as we have done in the current plan with certain opportunities identified last year. In particular, I am referring to the following. The full consolidation of certain invested companies in 2026, we consolidate ETAmbiente, a company operating waste collection. The possibility of developing municipal waste and capacity through waste-to-energy plants. The new plan now includes the construction of a new line at the Poggibonsi waste-to-energy plant, and a new data center connected to our thermal power plants.
Some of the opportunities identified previously have therefore become part of our industrial development and are included in the plan we are presenting today. Looking ahead, we are assessing further initiatives which, taken together, could generate approximately EUR 100 million in additional EBITDA. These opportunities fall into two categories: inorganic growth and organic development. On inorganic growth, we are first considering participation in tenders for integrated water services, such as the one in Viterbo. In gas distribution, our interest is limited to areas where we already operate at least one service or that are geographical adjacent to our existing areas of operation. We are also assessing several potential acquisitions of small and medium-sized companies in the water cycle and environmental services. These initiatives are complemented by our objective of increasing our stakes in strategic investee companies that we do not control. Organic growth offers opportunities across almost all business units.
In network businesses, we could accelerate investment further. In water, this will be conditional on tariffs allowing the additional investments to be recovered within an appropriate time frame. In electricity distribution, we could bring forward the start of construction work on certain primary substations. We are also in discussions with data center developers to assess the concrete prospects for additional projects and the associated opportunities to supply energy. In district heating, further opportunities may arise to extend the networks and increase the contribution of renewable sources to heat production. We are also evaluating upgrades to existing waste-to-energy plants for municipal waste treatment, potentially integrating them with CO2 capture systems. Finally, developments in electricity demand and capacity market price signals could make it appropriate to upgrade thermal power plants, moving towards higher efficiency technologies such as class H turbines.
To conclude, let us briefly recap the key pillars of our industrial plan. First, this is a solid plan built on the Group's strengths, which enhances resilience in an increasingly complex and volatile environment that remains challenging in the short term. It is based on a clear strategic focus and selective capital allocation, with EUR 5 billion invested in strategic infrastructure. Second, operational excellence, as described by Gianluca Bufo, is the main driver of profitability growth and value creation. ROI will therefore increase from 6.7 in 2025 to 8% in 2030, and ultimately reach 10% in 2035. Third, the development of strategic assets and operational excellence must go hand in hand with our commitment to adopting best practices across every area of the business. This will enable us to improve service quality and translate those improvements into higher profitability.
Fourth, as we have demonstrated, the Group maintains a rigorous focus on financial leverage, particularly in the current environment of interest rate volatility. For this reason, the net debt to EBITDA ratio will never exceed 2.1x during the plan period, preserving a financial flexibility buffer that will allow us to seize high value accretive growth opportunities. Fifth and final point, we confirm one of the market's most attractive dividend policies. Today, about approximately a 2% dividend yield, and we expect the dividend per share to grow at an average annual rate of 7% to 2030. We can now move on to your questions.
If you have a question, press pound five key on your telephone. The next question comes from Javier Suárez from Mediobanca. Please go ahead.
Hello, good evening. I have some questions.
I will begin with the figures in target for 2028, 2035, and the business plan you presented last year in November 2025. I noticed that the EBITDA targets are about EUR 30 million variation. Could you please explain why you expect this EUR 30 million below the previous expectations? There is also a strong acceleration of EBITDA. I believe this is linked to the four new WTE plants. Do you have any idea when they will become operational? Where are you in the approval phase of this infrastructure? The second question concerns the EBITDA. The target is below in the 2028-2030 period, and I think this is linked especially to higher prices. Can you please confirm that this is so, and how this increase in interest rates is making your company review the investments. The third question is related to guidance.
In the presentation, you gave a target for 2027 of 3%-4% of growth. Do you confirm this growth for 2026? Can you share with us the net income growth, not only for 2027, and also the 2.7 net income target growth for 2026? Last question is more linked to governance. You presented a business plan that is very ambitious for the next 10 years, and I would like to know how much the market can be stable from a management and governance point of view that allows you enough stability to make these plans. Thank you very much.
Let's start with the 2026. We confirm the guidance, which is comprised by a 2.4% increase in EBITDA, a 2% increase in net profit. This has a continuity with the first years of the plan. Concerning 2027, today we can give you a forecast regarding the EBITDA.
We will be more precise for net profit over the year as usual. Concerning the variations between the old plan and the new plan, I will start from 2028, where actually we do have a reduction of about EUR 30 million in this forecast compared to the plan we presented last November. These variations can be linked partly to the session of Egea Acque. in August this year, we gave the matter of Egea Acque to CO.GE.S.I., and this means a reduction of about EUR 30 million for revenues in the water side for 2026. This is also due to the reduction of investments in photovoltaics, while the remaining side can be linked to the environment business unit. Here we substantially have a slower recovery of margins of the treatment plants. This is an improvement path that we already began.
As we also explained in the half year presentation, we have a recovery in the second semester and a full recovery of the year. We will be fully in line by 2029 and 2030. These are the main reasons for the discrepancies in the EBITDA. Concerning 2030, we are substantially in line. We have about EUR 1.6 billion in target. We also have the effect of HAI in 2030. In the last plan, we had foreseen EUR 80 million. Photovoltaics should have incremented in last year because we had foreseen to invest EUR 200 million, so about 200 MW of installed capacity. But we also have a compensation of this negative effect due to the increase in synergies.
So the component of synergies mentioned by Gianluca, by 2030 we will reach EUR 130 million. Concerning the EBITDA, we have a higher impact of financial management.
We have foreseen this plan about 20, 25 bps more of cost of debt. There are two from the increase that we will have in the emissions, so in the refinancing. The first one is in October 2027, the second in 2028, for the deadline of the bonds. Giovanni, maybe explain better the WTE.
Yes, I confirm that the significant increase in 2035 is linked to WTE. So these four interventions, two important reforms and two constructions that contribute about EUR 200 million to the improvement of the results in 2025. Torino TRM Advancing is authorized. We are about to start the building phase. Concerning CL and Poggibonsi, the authorization flow has already started. There is no tender for that, but there are tenders for Liguria, Calabria, and Gioia Tauro.
In Gioia Tauro, we are in a good place with the tender, while on Liguria side, the tender is fully ongoing. Concerning governance, we have just announced the nomination of the names for some important directors for the new business unit units networks and markets. So, concerning governance of the three delegates, as in any board, there is a deadline in a year, and then the investors will decide the governance, but this is what happens in any quoted business. At the moment, the governance is operating in excellent way based on the results. We are really working together, and we are in agreement, and this shows its strength and its results, and this plan shows stability and our confidence in our long-term future. We believe in this.
Next question is from Roberto Letizia from Equita. Please proceed.
Good evening. Thank you for this presentation.
I hope you can hear me well because I am on the run. A bit update on the hirings. What was the main solution on the regulated WACC? Did the plan already include this regulated WACC? Do you proceed to use hybrid concerning debts? More clarification on the power plant generation. We see that they are significantly lower in 2028, and in 2028, there is 130+ for energy prices, and we believe it is very conservative. How do you foresee to do this from a strategy point of view, and if this potential upsides are then moved to the customers? Could you please give us more information about power generation? Could you please tell us something more on data centers development? When do you foresee the first contribution during the plan, and what are your forecasts? Thank you very much.
Yes, concerning WACC, we are in a continuity phase because we have not included any reduction elements that could come into effect by the end of the year because there is always an uncertainty situation. Last year, the elements could be evaluated only during the last stage. We believe that if the trigger is activated, there may be some effects. There is some reduction of 20 bps on existing gas distribution, and a reduction of about EUR 4 million of EBITDA. I would like to stress that the context also gives us some positive effects. As you know, the increase of inflation also the terms are a push towards price, and about 30% of this can be compensated by an increase of inflation. Concerning the second question in hybrids, we confirm our position that we also had last year.
We will turn to hybrids only if growth opportunities will arise, in particular inorganic growth opportunities that will justify recurring to this tool. We didn't authorize the emission of further hybrid elements. Concerning power generation, in 2028, this figure was a mixture of first half year that we foresee to be fully sustained, and a second part of the year in 2028, where there will be a new alignment to the previous situation. As a consequence, today, there are no large opportunities to have more coverage on 2028 because the markets have very low liquidity.
Just as a small addition to what Giovanni said, the issues of hybrids is considered as a whole. A further comment on how we can generate value in this dynamic of the prices. Our attention towards our customers is strong and very significant, but this is also due to the competition.
The prices of energy produced and sold are in line with the market. There are no trajectories that allow us to move the result in favor of one or the other business unit or to help customers further. We help our customers with multi-annual tariffs, multi-annual prices. To date, we sold almost always at a fixed rate price. This will also help us to contain the churn rate.
Luca, concerning the loss and development, we have a CapEx-light business model. We operate as energy producers, and we have our customers spare on production. Some developers need a direct link with the central to have security groups that allows them to spare on continuity groups. Due to the sparing opportunities that we offer our developers, we ask in return a small part of the saving.
This generates an interesting CapEx-light business model, so we do not have asset risks and the risk in terms of cost, but only benefits in terms of savings. So we invest a few million EUR to connect our centers, and we foresee for 2026, 2027, EUR 6 million that will become EUR 10 million in 2030. We are developing this project. We are discussing this with many partners, and we think it is very promising.
Next question comes from Francesco Sala from Banca Akros. Please go ahead.
Good afternoon, everybody, and thank you for allowing us to ask questions. The first one is on the network business unit. Is there any topic that I am missing that gives a reason for the trend you explained? Concerning the business plan, who you hired, what is your plan towards inflation and the use of regulated assets?
Third question, if I understood you correctly, there is two competitiveness on some dyes, and this impacts the development of renewable energies. Did you access other channels such as PPA? What should happen for you so that the renewable energies become more convenient according to your targets?
Thank you very much. Concerning the deflator, our hypothesis is to have a deflator of 3.1% both on electricity and gas distribution, and then stabilize the deflator at 2% in line with our forecast concerning the inflation. Concerning the water cycle, the first update will be on 1st of January 2024. It will be a two-year development. So we are calculating a 4.5% increase in RAB, and we foresee a stabilization at 2%. We are not seeing any effect on D&A components, and I now give the floor to the CEO for the CF6 side. Yes, I will leave it to Gianluca to comment on the PPA.
Concerning photovoltaics, we are going on with the existing projects, one in particular. We are observing the market to see if there are further opportunities consider the prices and the competition. There may be interesting opportunities in the services world, in the world of services linked to photovoltaic, such as battery and balancing. We are assessing the situation, and certainly, the competition on FER X bids is very high. So at the moment, we believe this could be an opportunity. It would allow us to link also this to our networks. So the priority at the time is on asset allocation, and in case there will be an improvement in our investments, in this situation, we will invest, otherwise, we will continue to wait.
Concerning FER X and PPA, we participated to a tender, and the plant that we are building with the 54 MW in the northeast of Italy, which has been included in the investments for photovoltaics. The tender was particularly difficult, both in terms of price and in terms of those who were not able to access those kind of volumes, even though they had title projects. It was a clear signal that the market is going in a different direction. For the next tenders, we expect 10 GW during the tender. So there is a very low residual for the existing project park. That is why we need to be more prudent and also more concrete. On PPA, we are already PPA biased. We use it from third-party plants. In France, it is more than half of the production from the group's plants.
We use it in origination and in our energy management portfolio. It is a longer cycle compared to the volumes we sell to final consumers. If FER X remains so competitive, we can also see the market of our customers, where there is indeed a movement in the last few years at the Italian level. These are corporate PPA with low profitability and high volumes, that are not so profitable compared to the gigawatt per hour that we produce due to the photovoltaic energy.
Next question comes from Emanuele Oggioni from Kepler Cheuvreux. Please proceed.
Good evening, and thank you for your presentation. The first question is related to district heating. I see that you foresee a growth of volumes of district heating, that is relatively low, but the level is very high.
Because it goes from EUR 140 million to EUR 145 million, and the volumes increased by 10 million cubic meters. Could you please explain the underlying hypothesis below this important growth of EBITDA in district heating that drives the energy business units, while the EBITDA linked to the energy variation is more prudent? Always concerning district heating, I would like to understand without the regulatory hiring, because this business should become regulated, and I believe you have hired on a continuity basis compared to the previous period. This is the first side of the question. The second question is related to market, the retail energy supply. You basically slightly improved the EBITDA target for 2030, about EUR 5 million, if I'm not wrong, with a customer base of about 2.3 million.
After a year, after November 2035, we can see that your assumption on the market competitiveness is unchanged. Or they are compensated by the new change. Can you give us more details about this? Our last question is linked to the additional development plan of those EUR 60 million plus EUR 40 million of EBITDA, not included in the estimates of the last plan. What is your hypothesis of investments or cash out for acquisitions related to the EUR 60 million to 2030? What is the maximum leverage that can be exploited if these further opportunities will be exploited? Thank you very much.
Thank you. I will start with the district heating. In continuity with the current plan, the cost of gas due to the ARERA regulation makes us very satisfied after a long discussion. There was a development nationwide, and Iren was decisive in this development.
There was already a competitiveness between heating plants in the houses and industrial plants. RAB is an element of discussion, that it should be fully regulated, and this will make more comprehensible elements that today are linked to commodity. Concerning the EBITDA development. The development of volumes, I have a commentary about it previously in the speaking notes. This is linked to our way to exploit our marginal growth. We are allocating investments on the district heating to exploit our existing plants that allow us to generate marginal costs and marginal profitability, for example, which it is in Alessandria. But given the volume of Turin, where we also have the fourth line of TRM, 30 million more of district heating can generate a marginal cost that amplifies the EBITDA generation and also improves further the ROI that are scalable. Moving on to the market business unit.
History, we are improving compared to last year. Compared to the view we gave last November in 2025, we confirm a decrease in competitiveness compared to the current level and a stabilization of competitiveness. We are observing it also in these difficult months, where besides competitors of players in the market, we also see the change of the customers that remain more inside the customer base that today gives more value to the 2.3 million customers. There is a slight improvement in our churn rate expectations that was already decreasing compared to last plan. This year, the business unit in the scalable platform that I was explaining before activated, in particular with the consistency of those AI projects. Starting from a good position, the scalable position activate those AI projects that were very satisfactory for us, and this path will go on.
Aside from a slight improvement of churn rate, we also foresee a better operational efficiency due to the higher contribution to the EBITDA for 2030. Concerning strategic options, we hypothesize EUR 100 billion with investment of about EUR 600 million. In part, this will be covered by additional EBITDA, and this is coherent with the financial flexibility that we represented before as commanded from 3.1 to 3.5x . This area is near about EUR 500 billion of financial flexibility, and in case this option of organic growth will become concrete, we will proceed.
Next question comes from Davide Candela from Intesa Sanpaolo. Please, you have the floor.
Good afternoon. Thank you for this presentation and for taking questions. The first one is a clarification about synergies. The target of EUR 105 million by 2030 must be read by adding up the sum you explained in 2025?
The second question is about renewable energies. In the past, there was a discussion about a potential evolution of the business towards other alternatives. Is this something you are still thinking about, especially if there should be an interesting opportunity, or are you satisfied with the current perimeter, and how this is going towards your energy management situation? The last question concerns the evolution of operating cash towards that. It seems to me that the 2023 target for that is the same, EUR 4.9 billion, despite a strong consolidation of EBITDA, more investments, more selectivity. So, the cash conversion is lower than what you expected in 2025. I was wondering if there are some circumstances that we should take into account, or if there is a structural circumstance that we should take to account.
Yes, I confirm that the synergies, so the intermediate target for 2028 of 130 towards 2030, also includes what we achieved in 2025. This must be considered in the calculation. Concerning operating cash flow, in this plan, we have considered an expansion of the net circulating capital through 2030 of about EUR 150 million. We will reach a maximum expansion of EUR 200 million in 2028. This dynamic, as we already explained during the half year presentation, is due to dynamics that are linked not particular to the energy business, but to the upper cap, which are components of revenues that are not billable because they overcome the tariff data. This is one of the objectives of improvement in the plan for the second part of the plan. This is an already ongoing dynamic, and we have seen that in 2026, there is an expansion of about EUR 150 million.
You have partly already seen it in the half year presentation related to these dynamics.
Concerning M&A and renewables, we leave any path open. Asset rotation in line to a move towards more profitable renewable sources. Should there be any opportunities in line with our plan, in an organic way, we could assess an acquisition. We are looking at the opportunities. There are no extraordinary operations foreseen, as Giovanni said. In case there should be an opportunity that is in line with our targets, both concerning debt and profitability, we will be taking that in full consideration in a more opportunistic than organic way.
To ask a question, press the pound five key on your telephone to move into the queue. If you want to remove a question, press the pound six key on your telephone. Perfect. Thank you very much to everybody, and have a good evening.