Good morning to everyone and welcome. You know, I see many familiar faces that were in the Epost last time, but also many new ones. Thank you for joining us. Thank you for being here with us today. Thanks also to those who are connected remotely. Thanks to our board members that have joined us today with this important event. Also thanks to all our employees that are connected from remote, my colleagues. Without them, I would not be here today. It is only thanks to their continuous effort that we performed what we did in the last few years, and we will continue performing. I'm very excited to be here today. It is really a special day. You know why? It is my second Capital Market Day, first of all. Secondly, we made an important announcement of a new acquisition last night.
Thirdly, we are here in the US, where I used to serve as CEO in North America a few years ago, after the General Cable deal. You know, I had great memories of that time. Even if, during a moment, I had to spend eight months in lockdown in my home in Cincinnati by myself, while my family was also in lockdown, but in a different place in Italy. A challenging moment. It was also challenging, I remember, when we started the integration of General Cable. I had a big question back then. I thought, how to engage, how to effectively engage the people of the two different companies? How to make them work as one single team? I thought to engage them with an inspiring vision. I have organized a town hall.
I gathered all people and I told them, we have a goal, we have a vision. We want to turn North America into the largest and most profitable region inside the Prysmian Group. It is not going to be easy, but if we work together with a proper team spirit, passion, and innovative approach, we will make this happen. We did it. A few years later, North America accounted for 40% of the revenue of the group and 50% of the EBITDA of the group. My vision became reality. That is why this place means a lot to me. Why are we here today? Why did we gather you again after only one and a half years from last time, from our last Capital Market Day? I think you know the answer, obviously. It is because in 2024, we beat the goal of 2027.
You know, for those who were not there last time, we set a goal of €2 billion EBITDA for 2027. It was a very ambitious goal because we were coming from €1.5 billion EBITDA in 2022, a few years before. We were confident to be able to achieve it in 2027, in four years. We did not make you wait four years. We did it in just one. In 2024, we reported €2.1 billion EBITDA performance. How has this happened? How could we deliver the target of 2027 three years in advance? It is because this is a new Prysmian. It is our new leadership style. We are agile, dynamic, innovative in the way we move in the market, in the way we seize the opportunities for growth, in the way we drive our market leadership.
You know, you always appreciate Prysmian for delivering a consistent and superior performance over our history. You will notice that the last two years have been different. We are in a new mode. We are in accelerating mode. If you look at the EBITDA CAGR 2007-2022, it has increased by 7%. We committed at the last Capital Market Day to deliver a 6% increase from 2022 to 2027. We actually delivered 20% in the last two years. What is the reason behind this acceleration? Threefold. Strong market demand. Strong market demand across all business segments, especially strong in transmission and power grid. Our consistent announcement of profitability due to our focus, revived focus on innovation, on solution, on an expansion of our business portfolio due to our M&A agility, proven by two large M&As in less than 12 months.
We will continue with this acceleration in the coming years as we capitalize on our leadership, on our strength, in order to deliver both organic growth and inorganic growth. Yes, we will keep pursuing growth in two T-senses, in every sense. Sorry for the Italian. Talking about growth, think of what we were 17 years ago. We were just one of the main cable players. There are a few like us with similar EBITDA. You see Prysmian, you do not see their names, but I think you can figure them out. Where are we today? We are three times the size of the first direct competitor. Also here, you can guess who it is. The competitor number two and number three do not exist any longer. We merged them. Competitor number four has remained a tiny one. We significantly expanded our company.
We significantly transformed our company from one of the cable makers into an undisputed global leader. An undisputed global leader that has distinctive assets, capabilities, the global footprint, the unparalleled portfolio, the large customer base, and the innovation power that is impossible to match. Thanks to these assets, capability, we can provide a unique strength. Growth combined with resilience. Let me tell you what growth combined with resilience means. Back in January this year, we were all done, all set with the Capital Market Day preparation. The target for 2028 was defined, and the equity story was ready to go. We noticed some dynamics in the North American market. We have seen some softening in price in the industrial and construction space. We shared this with you at our last earning calls. We disappointed you.
The market panicked, and we lost a 12% point of stock price in one single day. Fortunately, we did not panic. We reflected a more moderate growth of the ISC business in our four-year plan. We leveraged it. We embedded a stronger growth in transmission thanks to the solid backlog. We ended up with the same EBITDA as before, but with a different contribution of the different business segments. A high-quality mix of contribution. This is the beauty of this company. This is our strength. We enjoy and we rely on a multi-business portfolio, a multi-geography footprint. Often, these geographies, these businesses do not move in sync. In fact, they never move in the same direction. One goes up and one goes down. What matters is that the bottom line EBITDA of the company, the EBITDA of the company always grows. Take, for example, the last four years, 2021-2024.
We experienced all sorts of negative adverse impacts from the market. We had a raw material shortage, inflation, soaring energy costs, pricing normalization in INC, the stocking in digital solution in telecom North America. Have you seen any impact to our EBITDA? Obviously not. Our EBITDA has grown unabated from EUR 1 billion in 2021. I think you can tell the number to EUR 1.7 billion in 2024, excluding AnkerWire. This is what growth with resilience means. It is not a slogan for us. It is a real history. It is our track record of performance. It is our DNA. It is our ultimate value. If this is also your value, this is the company you should invest in. You should invest in a company in a way the stock price is very attractive these days. How did we create? How did we create this combination of growth with resilience?
It has been a long, deep, and successful transformation of this company over the last 17 years. You know, back then, we were a European-centric player. We are no longer a European-centric player. We are a global leader. We are a global leader with a dominant position in fast-growing markets like the US, where we had 10% of our EBITDA, and now we can count on 50% of our EBITDA. Over this period, we also significantly transformed this company. We shifted it from a cable manufacturer, from a cable manufacturer player into a world-class solution provider leader. We do play in a different league. We play in the more rewarding and profitable, innovative electrification and digital solution space. You notice that alongside the growth in EBITDA and in revenue over the last period, we also drove significant value creation. Significant value creation.
We were €3 billion market cap in 2007. We ended up with €9 billion at last Capital Market Day one and a half years ago. We now sit on €18 billion market cap. By the way, a few weeks ago, we hit €21 billion before we disappointed the market. Clearly, a story of great value creation. A story of value creation that shows also here an acceleration of the last 12 months. The TSR grew 470% from our IPO, but it has grown 75% from our last Capital Market Day. By the way, those of you who invested in us, who bet on us last time, well done. You clearly made a good choice. I speak as CEO of the company, but I am also a shareholder of this company.
As shareholders, I'm particularly proud, extremely proud to lead a company where 50% of the employees are also shareholders, including the shop floor workers. As shareholders, we will continue creating value for this company. We capitalize on organic growth, on the M&A opportunity, on the strength, on the tenacity of a company that has great ambition on the one end, but also a solid foundation on the other hand. I'm not referring to the plants or the equipment here. I'm referring to the invaluable know-how gained through our inclusive M&As. We will also capitalize on the strong drivers from the market that we've seen over the last four years that are bringing new life to the cable industry. Take, for example, the electricity generation. It is today based on 30% renewable sources and 70% fossil fuel. Tomorrow, this will shift from 30-70 to 70-30. Tomorrow is 2050.
The electricity demand is surging with a factor of two and a half times. The power grid, in order to cope with the additional demand of electricity, is going to double in size. The digital transformation is further fueled by data booming and AI expansion, data center expansion. You know, we designed our organization with four business units which exactly match the four drivers of the market. We are the only one that could do so. We are the only one with the luxury of a portfolio so large and comprehensive that covers the entire demand from the market. Unprecedented, unique. Have a look at this video to show how do we play in the different segments of the energy and digital transformation.
From when the sun rises, we are the one-stop shop with our synergistic portfolio. We are building the future from high-voltage transmission solutions to the power grid, electrification, and digital solutions. With undisputed technological leadership, such as complete transmission solutions, boosting operating efficiency and cost saving, unleashing new service standards, and boosting connectivity in the digital world. We are maximizing innovation and sustainability to drive growth, and we've been investing to meet demand, increasing our capacity and making the largest acquisition in our history. We can bring the new products and solutions with the highest quality, efficiency, and lowest environmental impact that is helping to connect and decarbonize our planet until long after the sun sets.
We already beat the target of 27 in 2024. We are now a solution provider. We play in the electrification and digital solution space. We want to inspire you with a new vision, with a new ambition.
Obviously, you already read the numbers, but let me play the story. From EUR 2 billion EBITDA in 2027, as per our last Capital Market Day, to EUR 3 billion EBITDA in 2028. Imagine EUR 1 billion more in one year more. Our EBITDA will grow to EUR 3 billion and 50 million. Our free cash flow to EUR 1.6 billion. The EPS will increase by 15%, sorry, 16-19%. And the shares of revenues that are considered solutions in our footprint will move from 28% in 2024 to 55% in 2028. These are great targets, very ambitious targets. As ambitious as they are, I'm sure that you will challenge them with your consensus. You will stretch us with your consensus. As you did, you know, as you did one year ago, we acquired AnkerWire. It was our target for 2027 was EUR 2 billion.
We added a $600 million perimeter change business in Synergy included. We were at $2.6 billion. You took the $2.6 billion as what you did. You rounded that to $2.7 billion. Where did this $100 million come from? You know, difficult it is to deliver $100 million EBITDA in this company. This time, unfortunately, we came with an ambitious number, $3 billion and $50 million. I know we have a problem. It is not a round number. I assume that you will not round this down to $3 billion. That was our original idea. You will probably round it up. You know, $3.1 billion does not make any sense. You probably want to round it up to $4 billion.
Please not yet. We are not ready for that. One day we will be there. This time is different from last time.
To prevent you from thinking that we set goals and then we beat them with the M&A, as we did last year with AnkerWire, this time we embedded the M&A upfront. The EUR 3,050,000,000 includes the M&A benefit. Channel acquisition, obviously. How are we going to grow to EUR 3,050,000,000? We are going to grow organically to EUR 2,900,000,000. The next bit to EUR 3,050,000,000 is EUR 150,000,000 coming from Channel acquisition, including synergies. How are the different business units going to contribute to the EUR 3,050,000,000? You know, this plan hinges on a strong, remarkable growth in transmission, which is totally in hand, supported by a strong backlog, a high-quality backlog of EUR 16,000,000,000. Why did I call it high-quality? High-quality is our backlog because it's reliable. It is large. It's secure. It is ready.
Reliable because it consists of projects located in Europe with transmission system operator, which has reliable customers. We don't have any fancy projects belonging to financial developers in our backlog that most of the time are either delayed, postponed, or canceled. Large, our backlog, because it's large enough to cover all the revenue through 2028. We don't have any speculative business in our plan as far as transmission is concerned. It is secured because it's based on notice to proceed in end and down payments. It is ready, guys. It is ready because we have the capacity ongoing. The capacity expansion is ongoing.
As far as the other business segment is concerned, power grid, electrification, and digital solution, while they still benefit from stronger drivers from the market, from solid drivers from the market, in light of the lower visibility and the shorter backlog that is specific to these businesses, we played a more moderate growth in our four-year plan. The plan is solid, backed by transmission growth. Should the drivers of the market in the other two segments further strengthen, we might see some upside. Not enough to bring the close the gap to $4 billion, probably, but we might see some upside. Let's deep dive on each single business, the transmission first. You see the market here has surged from a $3 billion market level in the last decade to $13 billion in the last four years, 2021-2024. The markets continue to remain strong.
We recently decided to unlock additional capacity for submarine and land capacity increase in Europe. Not in the United States, where we do not see the market growing, but in Europe. In order for us to remain market leader with a 35-40% historical market share of this market. Why are we market leader in this space? What is it that makes us unique in transmission? First of all, we master a full vertical integration in this space. We are the only player that is able to install all the cables that we produce with our eight vessels, without resorting to third-party installers, which is crucial because we have the best control of the margin, the cost, the timing, and the quality of the execution, thanks to the comprehensive installation activity.
Secondly, we offer the market a unique inspection and maintenance and repair solution to fix network damages, either from internal failure or external damages. You know why it is unique? Because most of the time, everybody repairs assets, repair network. But the assets are normally busy with our projects. This solution is unique because we have a vessel, a crew, joiners, installation engineer in standby, ready to intervene, to be mobilized and fix the network. Thanks to this solution, we can shorten, I would say half the time to repair from the usual 14 weeks that takes today with a current solution to less than six weeks. Think of the benefits for TSOs in terms of reduction of the revenue losses they incur when there is an outage in the line. This solution becomes also particularly strategic these days.
These days, the cable has become targeted to geopolitical conflicts. What truly, truly distinguishes us from the others is our technological leadership, something that we pursue with determination, with passion, with obsession, with innovations in three dimensions: in cable, in installation, and sensing. Cables, we keep developing a system that can transmit more power. The cost per MW transmitted is lower. This makes the energy transition financially more sustainable. Installation, we keep enhancing our capabilities, like the 3,000-meter water depth installation. It is unique. We are the only one to have it. Thanks to it, we can open the market to new connections, new routes, like that, for example, between North Africa and Italy and Europe. Sensing, we offer cables with integrated sensors that can maximize the flow of energy in the cable and allow fast detection of the cable fault.
We are not market leader by chance here. Technological leadership is key. It is crucial to maintain and grow our market leadership. We will pursue it forever in every sense. Please watch this video to have a sense of how innovative our solutions are.
At Prysmian, we are connecting our planet. We are driving the progress of new forms of energy, meeting growing demand with the best solutions. In a rapidly evolving world, we are guaranteeing energy security, helping to reduce the cost of the energy transition while protecting future generations. These are the projects at the forefront of technology, innovation, and human achievement that are making our planet safer and our society more prosperous and greener. We are the undisputed leaders. With a portfolio spanning 60 major projects in 25 countries, our extensive reach and proven track record mean that no challenge is too great.
From the largest advanced marine vessel fleet on the planet to the most sophisticated tools and the deepest expertise in the industry, our innovation is unrivaled. We are always available, monitoring 24/7 to ensure that these investments are in safe hands and that no challenge is too great. From land to sea, Prysmian is pushing the boundaries of what can be achieved. From the longest-ever interconnector, world record sea installation, to the highest voltage and most efficient transmission systems, and we're not going to stop. At the same time, we are thinking about the impact we have on our planet to keep what we love safe. Because these projects are our shared legacy, our investment in tomorrow. We're accelerating because tomorrow is coming today.
How we will grow from the result of last year, EUR 361 million, to the new targets? We will grow, capitalize on the capacity expansion, on the better margins of the projects in our backlog, with a rate of, with a CAGR of 25-28%. I heard that some of you were surprised this morning when you read the press release. Is it real, this CAGR? Yes, it is. It is. We mean it. And not giving you the exact number of EBITDA of 2028. But you know, I'll give you a hint. The chart is exactly to scale. You can measure the height of the bar. You'll figure out the EBITDA down to the last million. It will be an impressive number. Let me move to the second segment, power grid. Power grid segment is made of three sub-segments. High voltage, you see. Power distribution, so medium voltage and low voltage cable to expand the grid overhead lines.
We offer all sorts of sensors applicable to all these segments of business to monitor the network. The grid is huge. Today, the grid accounts for 80 million kilometers of cables. The demand of electricity is so strong in the next 25 years that this grid will double in size, from 80 million to 160 million kilometers. Eighty million more kilometers are going to be deployed in the next 25 years to allow the flow of renewable energy and to satisfy the users' demand of additional electricity. Yeah, we did super well, I would say. We already beat in 2024 the target that we set for 2027, $474 million last year, target $410 million. More remarkably, we grown the EBITDA margin from a not exciting, I agree, 5%, but only two years ago, into 13% now. Is it sustainable? Obviously, this is your most asked question.
The answer a month ago was yes, in the range of 12-13. And I confirm it. In the range of 12-13%, this will be our margin power grid for the next future. It depends on the mix of geographies and the different imbalance between capacity and demand. The demand, as I told you before, is super strong. We are the only global leader in this space. We are unique because we are the only one with a large footprint. We have at least 40 factories in the world that make power grid cables, located close to every customer. We have a large footprint. We have a very close proximity to all utilities. We have this unique exposure to the medium voltage, low voltage, power grid space of the United States.
We are also unique because we drive innovation and sustainability through the whole value chain of this business, from supplier to customers. We provide our customers with unique solutions, unique sustainable solutions that help customers achieve their sustainability goals. We work in this regard in two dimensions, scope three and scope four. Scope three are the reduction of the emissions of cables during the cable operations. It is an important KPI for our customers to underpin their goals. We deliver cables that have energy losses reduction thanks to sensors that are made of recycled material, copper, aluminum, polymers. The most innovative piece is the scope four. This is the new frontier. It is about no reduction of emissions. It is about avoidance, avoidance of CO2 emissions. Here we offer a solution that our head of innovation, Srini, will tell you more in a moment. It is called E3X.
It is a special coating applied to existing overhead lines, whereby the power of the line, the power that the line can transmit, is enhanced by 25-30%. In this case, the reconductor of the line is avoided. The expensive investment to reconductor the line, to replace the conductor with a new, more powerful conductor, is not required, and the emissions are not emitted. Why is sustainability so important in our, in this business? It's important because for us, it's a competitive advantage. A couple of weeks ago, we participated in two tenders in HVAC space in North Europe. We were not the cheapest in price, but we scored high in sustainability. Now, sustainability criteria are everywhere in the tenders, in transmission, in power grid, everywhere. We won the projects. Differentiation, sustainability, innovation is key to drive our growth. Let me move to the electrification segment.
The INC business is one of the segments. Industrial and construction specialties is the second sub-segment. In INC, we deliver low voltage, medium voltage cable to electrify buildings. Electrifying buildings means to connect buildings to the power grid. This is a business where we connect a residential business, but more importantly for us, non-residential buildings. Industrial factories, plants, commercial centers, airports, all this stuff. Specialty is about the electrification of equipment. Automotive, solar park, crane, mining, defense, marine. This market is undergoing a significant transformation because of the electricity demand that I mentioned to you. The electricity demand is going to surge from today is 20% of the total energy demand worldwide. In 2050, the electricity will be representing 45% of the energy mix. This is for a twofold approach, twofold reason.
There are fossil fuel-based applications like gas heating that are going to be replaced by electricity-based applications, heat pumps. There are already existing electricity-based applications that are further expanding, like data centers here in the US. Data centers already consume today 6% of the total demand of electricity. This number tomorrow in 2030 will surge to 14%. How did we do here? We beat them also in this space. We beat the target of 27 in 2024 organically, but more importantly, of course, thanks to the acquisition of AnkerWire. Why are we unique in this space? We are unique because also here we drive sustainability, innovation, differentiation in the whole value chain. Think of the EPATT product lines. It is a new line that we launched two years ago. It is made of products that are consistent, compliant with the major street low carbon footprint criteria.
We launched it in 2022. It gained momentum in the market. In 2024, 35% of the total electrification revenues, 35% means $3.5 billion, were made of EPATT compliant products. Amazing. We are also unique here because we own what I consider the most innovative and powerful and unique asset available in INC space worldwide. Anker. AnkerWire in McKinney. What is it that makes AnkerWire so special for us and for the customers? Is that this is a large, large production compound, basically a concentration of 12-14 normal-sized plants. This is a compound fully verticalized upstream with production of rod and/or compounds. It is also verticalized downstream, basically with a distributor. It is a large-scale distribution center attached to the cable site, to the manufacturing site. With this, we offer quality cables in super, very short lead time.
We can perform 24-hour service or cut to length cables across the United States. Unprecedented and nobody can copy it. You will need to restructure your footprint, close 14 plants, rebuild those 14 plants in one site. Impossible to do it. Thanks to this, we can, thanks to this solution, thanks to this asset, we can capture more demand and enhance our profitability. Now I'm touching a sensitive topic because I know you have million of questions about the sustainability, actually million of doubts about the sustainability of these margins. This margin, I tell you, is sustainable mid-long term because they are driven by the solid market drivers, the electrification demand, which stems from data center expansion, remanufacturing of plants, sorry, repatriation of manufacturing plant in the USA, investment in infrastructure. Short term, we might see some softening in price, of course.
Should this happen, we can still leverage the service to temper, to mitigate this price pressure and use it as a competitive advantage to outpace the market. Thanks to this asset, when the market grows, we can grow more than our competitors. When the market softens, we soften less. We're done with integration of this business. The integration is fully completed, implemented. We are working on the synergies. Most of the operational and commercial synergies will be captured by the end of 2026. There will be some additional commercial, sorry, operational synergy that will come on stream in 2028 once we'll have completed the investment in the new equipment for rod production. You have seen probably this morning,
Yes, this morning,
We made the board, actually made an important improvement for a new, for a brand new medium voltage plant. Four additional medium voltage lines are going to be built somewhere. We cannot tell you where, but you can guess in the US to provide a medium voltage cable to the IC space, further cross-selling opportunity, and to provide medium voltage cable to the power grid space. In both cases, leveraging the unmatched service level coming from an asset like McKinney. Let me move to the third one. Sorry, the third one is the fourth one. Digital solution. You see how strong the drivers from the markets are in this space. Mobile data, data center expansion, AI expansion, all sorts of data booming is fueling additional demand of data in this space. Here, in contrast to the other business segment, we are far from the target that we set in 2027. Of course, we cannot excel in all places.
We are far because we suffer from significant stocking that occurred in the last two years in digital solution in the US. Fortunately, the stocking is over. The panic buying that was in 2022 will not happen any longer, but the demand of the market has started to rebound very solid and very resilient. We will beat the goal that we set for 2027 organically and also thanks to the acquisition of Channel. This is the space, by the way, that you keep asking us, why do you keep telecom? Isn't it a distraction in your business portfolio, a distraction to your core business? We see differently. We see differently because for us, digital solution is really relevant to our strategy for twofold reason. There is convergence in the market. There is convergence between the energy grid and the digital solution grid.
If you miss the optical portfolio, you would miss this opportunity. Digital solution is complementing nicely the portfolio of energy cables. It provides a synergistic portfolio. That's something that enables us to sell one-stop shop solution to our customers. We will continue to invest in this space as we capitalize on innovation in fiber and optical cables to meet the growing performance required by challenging customers like carriers and hyperscalers. We will invest to further expand the portfolio solutions. Channel acquisition comes into play here. Channel is a large acquisition in the US to enable us to combine our strength in cables and in fiber with connectivity. It is a full-fledged player in connectivity space. You know, we were discussing this morning this with some friends. Connectivity is probably the most important piece for our business.
If you do not join cable, you cannot produce cables longer, thousands of miles. Connectivity is essential to the deployment of any network, be it the energy network or the digital network. The rationale behind this acquisition is straightforward. It of course strengthens our position as a solution provider. It makes us an important player in the US space. US in digital is by far the largest fiber to the home, fiber to the X market in the world. We also have access to a fantastic platform of commercial strength and innovation strength from Channel that we can capitalize on and further expand organically our position in the US and outside the US.
Now, in light of this important acquisition, in order to avoid that we lose focus on the integration and on the delivery of synergies, and frankly speaking, also in light of this volatility that we noticed in the financial market in the last two months, we paused the decision of US listing. We paused it while we still recognize the strong value creation associated to it. You have seen how strong our targets are for 2028. Some of you might wonder, will they be able to achieve these goals? I tell you, we are highly confident to be able to achieve this goal. We are highly confident because we count on our market leadership. You know, our market leadership is based on a solid foundation that dates back 140 years.
It dates back when here in New York, in 1886, I'm sure you don't know it, we electrified the Statue of Liberty. We electrified it again in 1986. Obviously, cable cannot last beyond 100 years, and we had to replace them. We fortified our leadership thanks to our rigor, our discipline, our remarkable track record over many years. Today, our leadership is centered on three great assets: synergistic portfolio, the people, the unmatched people value, and the relentless pursuit of technological leadership. Synergistic portfolio, let me go with this first. With our four business segments and our comprehensive cable set, we can address the entire demand coming from the market. We can capitalize on the organic growth opportunity and further amplify this opportunity with our innovation and solutions and focus on sustainability. Let me give an example of the synergistic portfolio in action. Data center.
After the acquisition of AnkerWire, thanks to their exposure to the electrification of data center, now with our portfolio, we can address the entire demand of cables coming from data center. All our business segments, the four of them, transmission, power grid, electrification, and digital solutions are exposed. Exposed means that we make significant revenues with the data center thanks to the data center expansion. Second value, people. This is the real strength of this company. It's the real strength of the company because we developed it. We created it. With our inclusive approach in M&A, two-thirds of our people belong to former companies. Two-thirds of our people belong to Channel, AnkerWire, General Cable, and Vraka. It is true. It is obviously true that we do M&A because we want to buy assets, expand the portfolio, and enlarge the customer base.
The true reason, the real reason why we do M&A is because with M&A, we buy talent, we buy competence, we buy know-how, and then we engage these people with our company values: team play, innovation, and passion. Technological leadership. Technological leadership is key for us to further grow our market leadership, but it is also essential to continue our transformation from a cable manufacturer into a solution provider. We came a long way from 18% of revenue that was solution in 2010, 28% last year, and 55% is our goal for 2028. That means that more than half of the revenue of this company will not come just from cables. Service, component, connectivity, differentiation, sustainable solution, a lot of other things that help us enable differentiation and pricing power. Innovation, technology, performance, speed, and sustainability, all these are key ingredients to our strategy and our success.
They are not just ours. We know there is another Italian company, an Italian champion that capitalizes on these values to succeed in the market. Please watch this video and see who these other companies are.
How do you tell the story of a passion? A passion born of the spirit of racing carried in the hearts of enthusiasts everywhere that defies time, age, language, and culture, that unites young and old, individuals and team, employees and owners in a lifelong sense of belonging. How do you capture the constant desire to push boundaries, master new technologies, adapt and evolve to blend tradition and innovation, yet still stay true to your DNA? How do you capture the essence of what must be lived to be understood?
For this is the essence of what it means to be Ferrari: to epitomize the power of lifelong passion, to do what others only dare dream, to audaciously redefine the limits of possible.
Dear all, I'm very excited to welcome on stage Benedetto Vigna, CEO of Ferrari. Benedetto, thank you for coming.
Thanks for having me here. Nice having been here with all of you.
I was given a few questions. Actually, I had a million questions that everybody wanted to ask you. I chose some official one and then some personal one.
That's a better one. The best one.
Of course. You want me to start from the best one? No. Let me start from the official one. What does it mean innovation in Ferrari? What makes Ferrari unique in terms of innovation?
I think that innovation is the only thing that each company in this world has to pursue, to manage with the uncertainty of the future. I have the luck to work in a company that makes innovation at the center of what we do. I've been working more or less 30 years in my life on innovation. This morning, I was chatting with our IR responsible. Many people have many different definitions. For me, the definition of innovation is very simple. Innovation is the way to go from know-how to money. That's it. I mean, you can find any definition, Harvard Business Review, strategy. No, that's it. For us, innovation is important. We do different kinds of innovation: innovation of product, innovation of process, innovation of management, and innovation of system. Without innovation, I think Ferrari, Prysmian, many other companies cannot have a sustainable future.
It is a strong driver of your brand, of your growth, your market position in all markets.
Definitely. I mean, as I said, I have been before I was working at a company making chips. So fiber to the home, you were a client. There is only one thing really that can keep alive a company: this innovation. I have to say that I made a phone call before. I'm going to take some share in Italy.
By the way, it's not a simple special for you. I mean, we are in a cable business, a B2B business, but you sell cars to private owners. It's not simple, I believe, to conjugate or to integrate innovation with luxury because you consider your brand a luxury brand.
Yeah.
Sometimes I think your engineers come into a great clash every time when they invent something that makes innovation relevant. At the end of the day, you have to sell a product that looks like a real luxury car,
Like some heritage and those things. Yeah. Look, I think that one of the points I'm working a lot in Ferrari, and I'm telling to all the colleagues, starting from myself, is that we are lucky because when we have to explain what we do, everyone understands us easily. There is another point that I'm telling to the people in Ferrari, and I got a sense when you were speaking today that I can see in the eyes of many companies, like I saw you before, also the companies that are digging and mining the aluminum, also the people that are doing very, let's say, unsexy, unpopular, unfamous things, there is the same kind of traction for innovation. Okay?
This fact must always be remembered, especially when you are in a company that is Ferrari, a luxury company, where you have to put two dimensions together: the past and the future. I like to say, to simplify, that we have two eyes: one looking at the past, one looking at the future, and one brain to put them together. That's what we have to do. In high tech, I was working in high tech, and I think also here, quote unquote, the past is useless. In a luxury company,
It's the first one.
The past is important. What we do, we have the people of Ferrari that go in our archive that is part of the Italian national treasure, and we go to study because we need to study the past. Otherwise, we make something that has no relation.
Yeah.
In this sense, there is a difference, but.
Great. I think you have, apart from innovation and luxury, you must have a different challenge now that in this time, sustainability has to anyway be present everywhere. How can you? I mean, you emit sound, not noise. Somebody will tell noise. Sound, CO2 emission by design. Your cars are emitting CO2. How can you, I don't know, lead sustainability in your company, be innovative also in sustainability in your company?
First of all, I would like to say that the challenge we have, and I don't want to make it easier, is the challenge that any market leader has. The leader, a company is a leader if, and only if, is able to dare. When the people are not daring anymore, I don't think they deserve to be called the leaders. I believe it.
What I want to say is that it was 1947 when our founders, after, let's say, 61 years after Benz got out with the tricycle, okay, more or less, and they started to make what? A combustion engine. Why? Because that was the only propulsion that was available. The roads were not even existing. Okay? Now we go fast forward. We go, what, 2015, 2020, people start to talk about electric cars, and people are scared. Why are people scared? Because each one of us is scared about three things: whatever is diverse, whatever is new, and whatever is about the future.
Changes.
It's a change. I mean, maybe it's a matter of preservation, but I think the reality is that today we are talking about electrons. We are talking about digital solutions. Twenty years ago, when I was, you remember the bubble 2001? The bubble of 2001.
We do remember.
Okay. Yes. I was making chips, and we were making a lot of things. And the people said, "This market is faded." Not at all true. What I want to say is that, yes, electric car is posing some challenge, but this is nothing with the challenge that someone else had 78 years ago when there were no roads and when he was doing something that other people were already doing. We want to be a leader. Okay. Yes. We have today. We may do some mistake. And so what? We will recover. I mean, the problem is not to do a mistake, to make a mistake, to say correctly in English. The problem is to recover, to learn.
We are making something, a car that will be unveiled in Q4 this year that will be unique, something unique because we will not just put, let me say, four wheels with a battery and an engine like other people do for cost reason on the mass market. We are doing something that is exciting, that is making the experience unique when you drive it. There will be still the sound. There will be something. Let me say something. There will be some, let's say, when you enter a Ferrari, you interact with Ferrari with eyes, with ears, and with the full body. You have to wait a little bit. This is luxury. You have to wait.
That was your first experience with Ferrari when you first drove a car.
The first experience I was in F50, end of the 1990s.
I was here living here on the West Coast. I was in San Francisco. I had some friends. One of them got an F50. F50 is a car, 12-cylinder, done in 1995. Yes, it was a pretty unique experience. I mean, this was, you know, it was just before the dot-com bubble. Yeah. I remember now. We were in Silicon Valley when we heard on the radio, the radio that was there, the situation. It was a unique experience because you, when you are in Ferrari, you do not go from one place to another. It is a full body experience. I mean, I go usually on track every month on ice or regular roads, winding roads, but it is fine. There was a sentence here. You can understand only if you live the passion.
It's difficult to describe also because not being mother tongue, I may miss a lot of adjectives, but it's unique. You have to try.
What is it that makes the Ferrari experience so unique? Is it the performance, the super performance with the sound, or is it the fact that when you drive a Ferrari, everybody on the street stares at you and is very jealous of what they see?
We have different kinds of clients. Let's say there are some people that buy the cars because they want to try it, some people that buy our car because they want to show. We have the luxury to have, let me say, a lot of our clients are buying the car because they want to live it, not because they want to show. Other brands, they go more in this direction.
Our brand is more, I would say, culturally relevant. Okay? Having said that, which are the dimensions that we exploit to develop a Ferrari? One, performances. Two, design. Three, driving trails. Four, sustainability. Sustainability is fundamental. When you talk about driving trails, there is the linear acceleration, there is the lateral acceleration, there is the braking, there is the sound, there is the gearbox. There are many dimensions. We are considering all of these. The last one is the sustainability. I remember when I got in the company, there were only a few people believing in it. Now, if you come in Ferrari, everyone can tell you what is the carbon footprint of each material we buy. One kilo of aluminum, 10 kilos of CO2. One kilo of steel, one kilo of CO2. We have all these things. The people know that.
We changed mindset.
This year, 2025, we cut, we cut by a factor three, the CO2 emission, scope one, scope two. We cut a factor three versus four years ago. You know what is the capex we put on the table? Only the capex for solar panel that is in the range of EUR 10 million. Only the ideas of our people. We throw away, we save 5% of the aluminum because we throw away less and we buy less. Capex zero.
Sustainability becomes a sustainable goal, but also something to make the company more efficient, more cost-effective.
If you come in our company, you find solar panel, fine. You find fuel cell, hydrogen ready. You find that the latest generation, let's say, e-building that has been, that got the LEED certification is the only industrial plant in the world with a LEED certification that usually is given to building, you know, not for industrial use. We believe in it. We make it. I'm sure, I'm sure we'll get there.
Thank you. We have a last question, which is probably more a desire than a question. Can we swap the two positions in one day?
Why not?
You come to have an experience on the Mona Lisa, our vessel, our Ferrari of the subsea cables, and I can finally experience how to drive a Ferrari.
Done deal. I will come to see. Just tell me, I like a lot of those boats with a long cable. Grazie.
Thank you. Thank you again. Thank you. Thank you.
Thank you very much for inviting me .
Thank you. You've seen a lot of stuff, but more is to come. I would like to welcome on stage Srini, our Head of R&D and Innovation. Thank you.
Wow. Thank you, Massimo. It's a pleasure to join you on stage. What a nice surprise having Mr. Vigna here. I love these vignettes. My favorite one, no half to money. That's what I tell my team because they're dreaming always. Again, thank you all for being here. It's my pleasure to spend some time here talking about innovation and a little bit about the future. As I reflect on our company's innovation journey, it absolutely exemplifies what Massimo said, the strength and unmatched global presence, our talent, and finally, technological leadership leading to innovation and sustainability to being strong business growth drivers.
Now, the best evidence for this is seen in the growth of our new product and solutions vitality. We define this as a portion of our revenues coming from the previous three-year timeframe. We started the journey in 2007 with a laser focus on our product performance and cost control, which, by the way, remains to date in our DNA because the past is important. Now, from there, we have grown to an industry-leading 24% with a major acceleration coming from the last three years. Now, how exactly did we achieve this growth? We achieved this growth by starting with a foundation of seven R&D centers with a very Eurocentric footprint. Since then, we have built a global footprint of 27 R&D centers worldwide, close to our factories and, most importantly, close to all our customers. We started with 400 inspired professionals with expertise in energy cables and grew threefold.
Today, our global R&D team has more than 1,100 professionals, engineers, scientists, world-class experts in all four business units. The result? We're really pleased with it. We were able to get EUR 4 billion of revenues in 2024 from innovations that did not exist three years ago. Please think about that. What is our aspiration? We're not done. In Prysmian, you're never done. We want to be at 30% by 2028. When we do that, we're going to be world-class. We'll be among the top innovative companies, 5% across all industry verticals. You may ask, how are we exactly going to do that? For me, it all starts with our customers. We are closer to our customers, or at least we aim to be closer to our customers than any competition. We take every opportunity to see our products in use across their entire life cycle.
That gives us precious ideas to come up with solutions to do two things. One, make our customers' lives easier. Two, expand the application spaces we play in. That is the role of a market leader. This relentless external focus has really helped us set this trajectory to go from being a cable manufacturer to a solution provider. We are fortunate that we also get to play a meaningful role in the evolution of electrical and digital infrastructures of our communities. The interesting part, I want to take you all on an R&D tour in a Ferrari, a sneak preview behind the scenes on exactly what is fueling this desire to be a solution provider and our pipeline of future solutions. The tour is going to have these four stops. Let's start with the first one, our core technologies.
Our core technologies are the building blocks of our business. When we get these right, we set the company up for long-term commercial success. Here, I'm excited to share that we're investing in groundbreaking technology platforms in not one, but all four business units. The world's smallest optical fiber for the next generation telecom networks. Two, a very innovative hollow core fiber technology that we announced last week, a partnership with Relativity Networks, which is going to help with the deployment of AI data centers in a much quicker way. The most fire-stringent solutions to EPATT. Massimo mentioned that. EPATT is the industry's first low-impact cabling solution. Our customers have come to love it in the last three years, and we appreciate that. Next step is a personal favorite, an exciting one. We're going to talk about systems.
Systems for our transmission business unit, where we expect the fastest growth over the next four years. These systems are what allow us to provide turnkey projects and services to our customers. Here, as Massimo said, we're the undisputed technological leader in high voltage and submarine cable systems. We are the only player who has two extra high voltage DC technologies, including our proprietary P-Laser technology. These technologies can push over 2 GW of power. That is enough power for 1.5 million homes. By the way, these technologies are very relevant to us, money-wise as well, because they account for two-thirds of the EUR 20 billion backlog that Massimo mentioned. Going on to the next one, it's even interesting, our ultra-high-depth. We are the only ones in the industry who have a synthetic armor technology and the vessels that can help us install cabling systems up to 3,000 meters.
We just shattered the world record last year with a successful sea trial of a Tyrrhenian link at 2,150 meters. Next up, you know we're fortunate to have a very advanced fleet of our vessels. These help us actually extend the energy transition across many geographies. We're not done yet. Last month, if you've noticed, we also announced our latest innovation in this area. We are the only player now in the industry to have a full suite of medium voltage inter-array and export high-voltage cables with dynamic conditions for the acceleration of floating wind. This innovation will expand the space of offshore wind into deeper seas in Europe, especially like the Mediterranean Sea as well as the North Seas. The engineer in me loves to talk about these innovations.
I think it's better if we actually hear from a customer who's equally excited, if not more than me. Let's hear from Amprion.
The development of our grid is an important part of the German energy transition. Besides the common goal of a carbon-neutral future, it is part of the backbone of the social and economic welfare of Europe. Amprion itself is becoming more sustainable as a company. We set ourselves clear objectives and methods and track their implementation. We both, Amprion and Prysmian, are accelerating in the same direction, delivering the energy transition in Germany and Europe. Prysmian is known for leadership in engineering expertise and a relationship which is based on exchange and finding solutions. Prysmian is the sole player in the market who's able to offer two different technologies for 525 kV HVDC cables.
For our project in the north, we chose the P-Laser technology due to a combination of reasons. The most important one is the higher performance in terms of the operation and high temperatures. The application of P-Laser technology also for submarine cable systems could help to overcome challenges we see in the offshore business. We are not just talking about technological aspects. We are also talking about the execution of these whole systems. We do all possible together. Communication and collaboration are the key factor of the success. We have a high level of trust between our teams and the management because the future is our mission, and I'm proud to be part of it .
I love Claus's passion about the future and being part of the future together. Now, the next stop in our tour is going to be sensing. We live in a digital age where our customers expect not only greener products and solutions, but also smarter ones. In this area, we actually offer a complete suite of advanced electronic and optical sensing solutions through our EOS unit. These solutions actually help our customers in many ways: operational excellence, preventive maintenance, intrusion detection that's getting a lot of airtime now in Europe, like Massimo said, and finally, energy management, which is becoming very important. Even here, shortly, we're going to be announcing a breakthrough. For the first time, our team has come up with a solution, an integrated monitoring platform with distributed acoustic and temperature sensing, which can monitor lengths over 1,000 kilometers. When this is available in the marketplace, it's not only going to be a game changer for us, but for the whole industry. The final step, services.
As Massimo gave a heads-up, the combination of Encore and ChannelNow has really boosted for us this fourth area of services suite. We are able to now bundle cables, accessories, connectivity, and monitoring systems to make our customers give a complete solution. We're also able to address another very important growing need, labor shortage, with pre-terminated cables, connectorized solutions, both in the energy as well as the digital space. Now, for those of you who will join us at McKinney tomorrow, you're in for some nice surprises. You're going to see some brilliant examples of advanced packaging solutions that not only cut the carbon footprint, but also reduce the labor intensity on a job site. Now, these services are extremely vital for large-scale construction sites, such as the data center's boom, as well as the reshoring of manufacturing that's happening in North America.
Again, here, I'd like for all of us to hear from a customer, a very important customer, VESCON, on how we are partnering together to win in this space.
VESCON serves seven key end markets: utility, construction, network infrastructure and broadband, security, industrial, OEM, and data centers. Across each of these markets, there are secular trends driving growth, including AI-driven data centers, increased power generation, electrification, grid hardening, need for 24/7 security, and IoT automation. You know, of particular significance is the growth we're experiencing with our large hyperscale data center customers. Last quarter, our Vescon data center solutions business grew 70% year over year. As companies, we share a similar outlook on the growth opportunity across multiple end markets, supported by a product innovation, sustainability focus, and Vescon's ability to provide supply chain solutions to our joint customers.
During my 11 years at VESCON , I've seen Prysmian's willingness to invest where the market is. Your most recent acquisition of AnkerWire for $4.2 billion, largest in your company's history, is a testament to your commitment to the North American market. It is a combination of Prysmian's broad product portfolio and Vescon's ability to offer highly technical and complex services. For our hyperscale customers, speed and accuracy are key. With schedules that are constantly changing, VESCON and Prysmian have partnered together to meet the needs of these highly demanding customers through supply chain agility. Together, we are also investing in systems and solutions, leveraging generative AI to better understand customer demand patterns and working together to deliver the product at the right time and at the right place.
There you heard from two of our important customers. By the way, Hemant will be joining us tomorrow at McKinney if some of you would like to get a little bit more flavor from him in person. Again, our customers appreciate several things here: communication, collaboration, speed, and accuracy of our services and solutions. We're fortunate they trust us, our journey of innovation and sustainability.
Talking about sustainability, to share a little bit more about our sustainability efforts, it's my pleasure to invite my dear colleague, Cristina Bifulco, on stage. Cristina.
Thank you. Thank you very much, Srini, and good day to everyone. It's very exciting to return after one year and a half to share remarkable milestones, breaking news, and to set new ambitious targets, also in sustainability for both short and long term. I need to steal you the point.
Sustainability is an important driver of our innovation strategy, but most of all, it's the heartbeat of everything we do. Innovation fuels our sustainability goals, and both are the twin engines accelerating our growth since they are the source of competitive advantage, allowing us to keep our leadership in the space. The concept of sustainability keeps evolving and goes far beyond the carbon footprint. Our stakeholders, customers, investors, communities, they ask us, they help us to think bigger, to anticipate future needs, and to unlock growth opportunities, which combine performance with security, resilience with nature protection. As leaders in our space, we believe that our responsibility goes beyond our direct business perimeter, and it is to leave a positive impact, a long-lasting impact, a net gain on the ecosystems and the communities where we operate. Many of you are already familiar with our sustainability strategy.
We updated it at the previous Capital Market Day. Today, I will focus on what's new, where we are raising the bar, which new chapters we are adding to our sustainability roadmap. We will spotlight climate and biodiversity while reaffirming all our commitment to the previously announced targets. Let's start with climate, which is where we are taking the boldest step. At Prysmian, we believe that becoming bigger implies bigger responsibility. Our carbon footprint over the last few years materially increased, but so has our ambition. Our Scope 1 and Scope 2 baseline now exceed 1 million tons, 1,043,000 tons, showing a 20% increase in the last four years, accelerated in the last two to take into account, of course, the acquisition of AnkerWire, but also our own capacity expansion. Think about our investors: Leonardo da Vinci, Alessandro Volta, Mona Lisa.
Despite this material growth, we stick to the same ambition, which is to decarbonize 90% of our 107 plants and 27 are in the centers by 2035, being aligned with a 1.5-degree trajectory as validated by the science-based target initiative. You may ask, how is this possible? How can you stick to the same ambition despite this relevant growth? The first answer is because we're innovative. We are not only innovative in the way in which we launch solutions, but we are also innovative in the way in which we tackle decarbonization. Since we have the pleasure to have Srini with us today, can I ask you how innovation is backing decarbonization and what is making Prysmian unique?
Absolutely, Cristina. For those of you who joined us in Naples for our last Capital Markets Day and are back here, what's the big difference?
We've really taken out a significant portion of our Scope 1 and Scope 2 emissions. How do we do that? One word, maybe two words: sulfur hexafluoride. Sulfur hexafluoride, or SF6, is a mouthful. All I can say is it is the most carbon-intensive gas regulated by the Kyoto Protocol. To give you an idea, 1 kilogram of sulfur hexafluoride is equivalent to 22,800 kilograms of CO2. We used sulfur hexafluoride for several decades in our factories for testing high-voltage cables and accessories. Cristina, what we ended up doing was putting together a very accelerated innovation roadmap, and in a matter of two years, we eliminated sulfur hexafluoride from our footprint. Nada, there you go.
Fantastic. Proud of what you're doing, also because this accounts for more than half of the reduction we recorded in Scope 1 and Scope 2 in 2024 versus 2019, 20% out of 36%. This is what is making Prysmian unique. We're also going after the basic. We exploit all the energy efficiency actions, from LED lighting to heat pumps, from biofuels to the on-site renewable generation, solar panels, to off-site TPAs. We pull every lever to make this happen and to get some cost savings as well. This is just Scope 1 and 2, and this is not enough. If you look at where we generate, the vast majority of our impact is for sure Scope 3. You know there are two components here: upstream, how we source, and downstream. Over 90%, 94% of the impact of our emissions is related to the downstream part.
These are the emissions related to the use of our solutions once in the hands of our customers. The main reason here is the expected lifespan of the cable. Once a cable is installed, it is expected to last on average 35-40 years, in our case, much longer than that. If we look at where we are here, our baseline is 236 million tons. You can clearly appreciate the difference versus the million tons in Scope 1 and Scope 2. At the end of 2024, we were able to cut by 57%, almost 60%, Scope 3 downstream versus the baseline, which is amazing. You may ask, how? How is this possible? We are outpacing Scope 1 and Scope 2. The main reason here, the first answer is grid decarbonization. In 2024, the grid was greener than it was in 2019, our baseline.
The energy powering our cables was greener thanks to the global investment in renewable generation that we contributed to develop. This is one of the reasons why we keep saying sustainability is what we do. At Prysmian, my colleagues would say there cannot be energy transition without the transmission. You may challenge us, and you can say, okay, this is the grid effect, and I know you very well. What Prysmian is directly doing to cut downstream emissions? If we strip out the grid effect, at the end of 2024, we were able to cut by 21% Scope 3 downstream emissions. This is the pure effect of our innovative solutions. Srini, can you share with us an example of Prysmian's unique solutions that help us to cut downstream emissions, but also our customers' emissions?
Another one of my personal favorites, E3X technology. Since we're in the US, let's talk about overhead line transmission, because overhead line transmission has been identified right now as one of the most important factors to improve the grid resilience of the US grid. Over 70% of the overhead conductors today are more than 60, 70 years old. Here, we came up with a very elegant yet simple innovation, E3X technology. It's classified as an advanced conductor technology. The idea is you have a high-emissivity coating, a highly functionalized coating that you put on the outside of an overhead conductor. When you do that, you can benefit two ways. Either you push more power, 25%-30% more power, or you actually save the same amount in losses. We've gone a step further now. We've developed a set of robots which can actually be put on the existing infrastructure.
We're talking about 600,000 mi in our country here, where this upgrade can be done without reconducting or bringing the lines down. This is a very good example, Cristina, of how we are combining innovation, sustainability for business impact.
We also won an award.
Twice. We won the Edison Innovation Award, which are called the Oscars of Innovation, twice for this.
I should have brought you a recycled copper statue today. No, thank you very much, Srini. Can you share? I know that we have a few other options. Can you share with us another example of innovation which goes also beyond Scope 3 and which allows us to avoid emissions, the so-called Scope 4?
Since we're in New York, I'd like to talk about something which is more specific to New York. Just a piece of trivia for all of you in the audience.
New York is home to the world's largest underground distribution network. Right under our feet is 100,000 miles of power cables and 300,000 underground vaults or manholes where these cables are spliced together. Now, Con Edison, which is a utility that manages this whole network, is a very important customer to us. They came to us two years ago and shared that the single biggest concern or sources of failure they have in the network is poor workmanship. We're dreaming big together with Con Edison, Excellon, and the U.S. Department of Energy to come up with the world's first fully automated splicing machine, which will reduce the network failures from over 85% to 5%. This is a great example of using automation technology to reduce not only Scope 3, but also Scope 4 emissions. The most important part of all, we're hitting human safety. With this innovation, we're aiming to save lives.
Absolutely. This is amazing. Thank you. Thank you very much, Srini. Let's complement the view of Scope 3 and move upstream. This is how we source. Here, our baseline is 13 million tons, 5% of the overall emissions to the value chain, so less impactful than downstream, but more in our control. We are working, partnering with our suppliers to decarbonize the value chain and introducing new standards into the system through recycled copper, low-carbon aluminum, bio-based material, recycled polyethylene. This is because the vast majority of the carbon footprint of the product is at the design phase. Srini, how innovative we are here and how we are helping to push the standards of the value chain.
I was very pleased to hear Mr. Vigna share similar examples of what is happening in Ferrari. Yes, there's a lot of appetite right now across the value chain. The only point I'd like to highlight is I spoke a lot about customers, customers, but our approach to open innovation and collaboration extends both ways in the value chain. Each of these examples have been joint technology developments we have executed with some of our strategic suppliers. Everything from recycled copper, low-carbon aluminum that eliminates the carbon footprint of aluminum, 75%-80%, recycled polyethylene, and more recently, bio-based materials. Now, bio-based materials have a negative carbon footprint. It's like you're sucking CO2 from the atmosphere. Yeah, we've got our engineers, our manufacturing facilities using all of these to reduce our carbon footprint.
This is amazing. Thank you very much, Srini. If we add everything up, it's clear that we are accelerating. We are accelerating our decarbonization journey.
We are able now to move forward the trajectory we were following for Scope 3 from the well below 2-degree trajectory to the 1.5. We are following the same trajectory for Scope 1, Scope 2, and Scope 3. Today, we are proud to announce that by 2035, we will decarbonize 90% of Scope 1, Scope 2, and Scope 3, which implies that we are bringing forward our net zero year from 2050 to 2035. We are bringing forward net zero by 15 years. We will be net zero by the next decade, and this represents a new standard in our space. This is climate and circular economy. I told you before, we are adding new chapters to our sustainability strategy because it's never enough. We are introducing a new dimension, which is biodiversity. Our relationship with biodiversity is not new.
For decades, Prysmian has been a pioneer not only in connecting the world through cutting-edge technologies, but in doing so with the utmost respect for the ecosystem. From land to submarine installation, which is where our biodiversity impact is mainly concentrated, we have always followed a do-not-harm approach, making sure that we were minimizing any disruption and protecting the overall ecosystem. Today, we are taking a leap forward, and we are moving from a do-not-harm approach to a net gain approach. We are committing to be net gain on the most critical areas by 2035. Why? Because we are responsible, of course, but because also biodiversity is becoming a source of competitive advantage. This is one of the most frequent questions I received from you in the last couple of years.
If you take the most recent tenders in specific countries, especially EGL1, EGL2, but also EGL3 and EGL4, they all have biodiversity KPIs in the tenders. Since we are the leader in our space, we do not only want to meet requirements, we want to introduce new standards, and we want to push the industry forward. Few examples of how we are doing that. We are using advanced sophisticated devices, acoustic devices to direct and promote the nesting of protected species. We are using sensing and monitoring systems through the use of AI to determine marine life and monitor real-time marine mammals to make them safe. Something we did for the Elba Piombino, 40 km of route, we have engineered specific equipment to protect the seagrass meadows, Posidonia, the lungs of the Mediterranean, because these represent a vital carbon sink.
All these actions are not only helping the ecosystem to thrive, but also they are contributing to win projects. What net gain means? It means that the overall ecosystem after our interventions will be in better conditions than we found it at the beginning of our operations. We will disclose our milestones through the most rigorous framework in this space. For those of you who are familiar, the TNFD, the Task Force on Climate-Related Financial Disclosure, and we are completing the process to be considered an early adopter of this framework. We have been talking today about creating value for customers, communities, ecosystems through a holistic approach. Let's see how all these dimensions come to life in action. Let's take projects that you know very well, EGL1, EGL2, but also NECONNECT. The overall aim of these projects is to bring electricity to households.
The three of them will bring electricity to 6 million homes, green electricity. On top of that, we are making sure that we even increase our impact. We try to avoid or cut emissions. EGL1 and EGL2 will avoid 90% of the emissions through the use of biofuels, while NECONNECT will cut 13 million CO2 emissions in 25 years. Wherever the technology allows, we will use recycled content. EGL1 and EGL2, they have 20% of recycled copper. We look after biodiversity, but we also engage with the local communities, providing education, scholarship, mentorship to the local students. We are even opening our sustainability academy to our customers and our suppliers. This is not only about the transmission. We follow the same approach across all the business segments.
We have KPIs that we use to monitor the impact of our business, our sustainability impacts, revenues in our business, which is the sustainability revenues. These KPIs capture everything which goes from P-Laser to EPAT. Sustainable revenues were 19% in 2022, 37% in 2023, 43% in 2024. We are now targeting to exceed 55% by 2028. You can clearly see the acceleration. This trend is not accidental because our customers, being them regulated system operators, utilities, distributors, they are all asking for green, secure, long-lasting, reliable solutions. We are replying with cutting-edge technologies which cover all these aspects. We are using installation vessels and devices that protect the ecosystems. We are launching green labels like EPAT, which combine efficiency and low environmental impact.
Net zero by 2035, net gain in biodiversity by 2035, over 55% of sales from sustainable revenues, at least 50% of our employees, shareholders of the company. We definitely like the five. These are not just numbers. These are not just simple figures. These are our values. This is our unwavering commitment to leave a better world for the future generations. I am sure, Srini, you will agree.
Absolutely, Cristina. We've got our plates full here.
Thank you very much for your attention. Thank you very much for your support. I have now the pleasure to call to the stage our Group CFO, Pier Francesco Facchini, who will talk about value creation from the financial standpoint.
Thank you, Cristina, and good day to all of you attending in presence. Also a special thanks to all the investors and our Prysmian colleagues who are following us from remote. It's really special to be here with you today. It's special because, as Cristina and Srini told us here in New York City or in the US, we are making such a big difference to our customers, to the communities through our solutions. Back to my role here is to guide you on how we convert all the opportunities that my colleagues explained into value creation for our shareholders. In order to do that, let me start from our long history of delivery, of results delivery. In the period from 2007 to 2024, including AnkerWire on a proforma base, our EBITDA grew by a factor of four times, four times. In the same period, our free cash flow grew even faster by a factor of five times.
What is even more important, in the last two years, 2023 and 2024, this growth picked up speed, accelerated. You see that our EBITDA 2023 and 2024 grew at a CAGR of 20%. Our free cash flow at an even faster CAGR of 35%. Specifically, our free cash flow in the last two years, 2023 and 2024, compared to the targets that we had set at the last capital market day, exceeded these targets by approximately EUR 500,000,000. You certainly remember that at the last capital market day, we introduced a new financial target, EPS growth, earnings per share growth. You remember that at that time, we set an objective in terms of CAGR for the period 2022-2027 of a CAGR greater than 10%.
Now, I'm really pleased to show you that in the first two years of this period, 2023 and 2024, we overachieved this target. We achieved an EPS growth, diluted EPS growth of 15%, definitely above the level that we had set at that time. These were our past achievements, our past results. I want to now move into our future growth and into our future financial targets. In order to do that, I want to start with our investment plan, the new investment plan for the period 2025-2028, four years. It is a total investment plan of EUR 2.6 billion for the four years, including EUR 0.5 billion related to the latest acquisitions, to the latest changes in perimeter of AnkerWire and just signed the Channel acquisition. This definitely marks a growth compared to our historical level of CapEx.
You see here, we took a reference period of 2020-2023 when our yearly average CapEx amounted to approximately EUR 400 million, and this is now rising to EUR 650 million. This reflects very clearly the positive discontinuity which is happening in our industry, driven by the secular drivers of electrification, energy transition, and digital transformation. How does this investment plan compare with the plan that we were showing at the last Capital Market Day in Naples in October 2023? Here it is. Referring to the last investment plan presented in Naples and taking as a reference the period 2024-2027, it is basically in line, taking into account, of course, the new investments coming from the acquisitions. You see, it's in line at EUR 2.1 billion. If we take out from the EUR 2.6 billion, the EUR 0.5 billion related to the new acquisitions.
This definitely means a reinforcement of our capital efficiency. It definitely means that a stable level of CapEx is associated with upgraded financial targets, which is very important. I believe that this is particularly evident, for instance, in our transmission segment, where as Massimo showed us, we have significantly upgraded our financial ambitions. Massimo anticipated our main financial targets. I want to now zoom deeper into the four key financial targets, starting from the growth of our adjusted EBITDA and focusing on the period 2025-2028. Adjusted EBITDA is growing from the midpoint of our 2025 guidance at EUR 2.3 billion up to EUR 3,050 million, as anticipated, a growth of EUR 750 million, including, as you clearly see, the contribution coming from the just signed acquisition of Channel, EUR 150 million, including synergies for 2028. A significant portion of this growth definitely stems from the transmission business.
Here we are deploying our capacity expansion, both in manufacturing and in installation. This will drive a high double-digit growth, taking our revenues not far, pretty close to the level of EUR 5 billion in 2028, and our EBITDA margin pretty close to the level of 20%. Also, the other segments are giving a significant contribution to the growth of our EBITDA in the period, starting obviously from digital solution, and not only because of the just signed acquisition of Channel, also because of the organic growth that we want to pursue in the market, specifically in the US.
For power grid and electrification, the key points are in power grid, definitely pursue the mid-single-digit organic growth coming from the market, both from the U.S. and European market, and leveraging on the capacity expansion that we have done in the past and that, as explained, we'll do also in the future. For electrification, specifically for the industrial and construction space in North America, the key point is to achieve our run rate level of synergies at EUR 140 million, adding approximately EUR 75-80 million on top of the synergies which are already embedded in our 2025 guidance. Financial target number two, equally important, free cash flow.
Our ambition here is to move from the $1 billion midpoint of our guidance in 2025 up to a midpoint of our 2028 financial target of $1.6 billion, maintaining the cash conversion rate, so the conversion of EBITDA into free cash flow above the level of 50%, a very high, a very high level. Let me underline here that our $1.6 billion target 2028 assumes a normalization in the dynamics of working capital related to our transmission business. That's important. It means that for 2028, we realistically expect that the cash inflows coming from customers' down payment will basically offset with the working capital growth driven by the execution projects, the project execution accelerations, and the very strong revenue growth.
This differs very much from the situation that we have enjoyed in 2024, where our €1 billion free cash flow was definitely boosted, strongly boosted by a decrease of working capital associated with large down payments from our customers. As such, this makes, in my opinion, the target for 2028 quite sustainable also for the period beyond 2028. Financial target number three, growth of earnings per share of diluted earnings per share. Massimo anticipated we target a growth, a CAGR between 15%-19% in the period 2024-2028. That is obviously consistent with our EBITDA range, with a 2028 EBITDA range. We made the exercise here to recalculate and adjust the diluted EPS in order to exclude the amortization of intangible assets related to the past purchase price allocations related to our past acquisitions, Draka, then General Cable, and then AnkerWire in particular.
That's interesting because it sets a range, a target range 2028, between EUR 4.6 and EUR 5.2 per share, with a midpoint which is substantially five, very close to five. Financial target number four, return on capital employed. The numbers here are not really comparable to the targets that we set in Naples for the simple reason that since then, our net invested capital grew massively by approximately EUR 5 billion on the back of the acquisition of AnkerWire and just signed acquisition of Channel. Still, we set also in this case an ambitious target, moving from 16% in 2024 to a midpoint of 21% in 2028, an increase of 500 basis points. I want to move now to our capital allocation priorities.
I want to show you how a robust and strong free cash flow, cash generation over the period 2025-2028 allows us to combine equally important, equally valuable goals, the goals of growth, organic and inorganic, and the goal of further strengthening our financial structure. Let me start from this accumulative cash generation. We anticipate a cash generation for the four years at approximately EUR 5 billion. This compares with the EUR 3.2 billion that we set at the last Capital Market Day in Naples. That one was a five-year period of time. This is a four-year period. From EUR 3.2 billion to EUR 5 billion with one year less. I definitely think that this is obviously hinting at a much higher scale and a definitely higher level of cash generation. Back to the capital allocation priorities.
Number one, continuing our policy of steadily increasing the dividend per share, the DPS. We want to allocate here in the period approximately EUR 1.1 billion, growing our DPS at a CAGR of 12% and allocating approximately EUR 1.1 billion. Number two, reducing our net debt by approximately EUR 1.3 billion in order to achieve a run rate in terms of financial leverage, in terms of ratio net debt on EBITDA between one and one and a half times, thus further improving our credit merit and further strengthening our financial structure. Last, we'll be left with a flexibility on our balance sheet for approximately EUR 2.6 billion. Actually, EUR 2.1 billion, if we take out from this EUR 2.6 billion, EUR 500 million approximately of positive free cash flow effects coming from the application of IFRS 16.
This flexibility of €2.1 billion, mainly there from 2027, will allow us to address further growth, inorganic growth, so further acquisitions, or in case no attractive acquisition were there, which may always happen, to improve, to enhance the cash remuneration of our shareholders. Let me highlight here how the timeline is very important. The leverage reduction of debt comes first. Of course, we come from a very large acquisition, in particular AnkerWire in 2024. This will, the leverage will take place in 2025 and 2026. This will trigger the financial flexibility that I am talking about mainly from 2027. In a nutshell, this is how a strong cash generation meets our ambitions in terms of organic, inorganic growth, and also improvement of the shareholder cash remuneration. I thank you very much for your attention.
I hope I was able to convey you my confidence on these targets. I am now happy to invite back to the stage our CEO, Massimo Battaini, for the final remarks. Thank you.
Thank you for the time you spent with us today. I want to say that we have really many ways to bring us to the goal of 2028. We have many, many pathways. We have certainly our stronger position as a solution provider that is helping us to gain more share in the market, and more profitable revenues. We have our acceleration in the market, our dynamic approach and flexibility approach. We have also, you heard this a lot today, technological leadership to make us succeed even more. Most importantly, we have a CEO and a team highly committed to delivering these goals, highly committed. My people, my colleagues are here in this. You are one large team. We met today after one and a half years from our last meeting at the Capital Market Day in Naples.
Where are we going to meet next? Obviously, I don't know. Nobody knows it for sure. But I tell you that we, myself and my team, can't wait to meet you soon, to surprise you again with more good news. Thank you. I have one important moment again together. I will welcome on stage Francesco Gori, our Chairman of the Board, for one more good news.
The good news is that the morning is over. It's been an intense morning, I think very interesting. I want to thank you, all of you and all the people that are following us by streaming for being with us today in New York. I want to thank Massimo also on behalf of the board of directors and his team for the hard work and the excellent presentation that I think was very interesting for us all, including the board, because reviewing the full story with all the participation, including Benedetto Vigna and intervention and the customers, it's been very interesting. That is for today. The last news or information is the following. 2025 marks a very important moment in the life of Prysmian because it is the 20th year from when Prysmian was born.
Twenty years, I think, that have been spent in delivering results, improving the company size, the company footprint worldwide, and growing up talents that allow the company to reach the targets that today Massimo showed you, everybody. Twenty years of leadership that we are now accelerating, and there is no time like now to look forward to the future. Thank you.
I'll go to the last, Francesco.
It's time for Q&A.
It's time for your questions.
It's time for your questions. You were looking forward. I see Daniela already raising her hand. We will take questions from people attending here, but we also have the opportunity to take questions coming from the web. Of course, let's start from you, Daniela. You should get a mic.
Thank you so much. I just have two questions. It sounds like the big message is sort of pivoting more towards service. When we think about service, lots of the capital goods companies that we cover do significantly higher profitabilities in service than they do in product, sometimes two times or more. You guided sort of power grid slightly down the margins, electrification sustainable. It's not on the transmission bridge. I guess it's all on the digital solutions. Can you help us understand over the long run what that pivoting for services can really mean on margins? Is it services materially better margins than products for you or not? It's just more about sustaining where you are and remaining competitive?
Service is key in a business that on the one end has still some pockets of commodity. Of course, the building wire space is a commodity. Without the service, we will not be able to sustain the margin. There are also important portions of our business where service is less important because the technological leadership becomes prevailing. Altogether, we have a nice combination of segments of business unit. Service, technological leadership, sustainability will help us grow this margin. Today, we sit on 11%. The margin expectation for two percentage points, the margin expectation on transmission grid is going to exceed what we said the last Capital Market Day, where we said that we will reach the 16.5% level in 2027. We are going to go beyond that level. It is embedded in the 25%-28% CAGR.
Partly will come from volume, but a significant chunk will come from incremental EBITDA margins in the region, the 18%, maybe the 19%, maybe the 20%. This combined with also the acquisition of Channel, which is extremely lucrative in the digital social space, where our margin will move from the current 12% to 17% just thanks to the acquisition, brings the total margin or the EBITDA margin of the company in 2020 above 12%. How much above, we will see. It depends also a lot on the sustainability as we keep talking about it, how the INC margins from power grid. We have solid drivers. We have a great footprint. We have a larger intimacy with our customers. We are best positioned than everybody else to leverage all this stuff, capitalize on it, and keep growing the absolute margin as well as the EBITDA margin.
Thank you. My second question is just more, you've just decided to do one more step in the US, and there's a lot of anxiety, I think, from investors about sort of which stage we are in terms of US economy, where are we in telecoms and data centers. You clearly decided to do this move for Channel now. Can you give us a little bit of a context of why now? Was this a competitive process? Do you have a different view on the market?
Channel is not our last minute chance. We've been working on M&As in target setting, in target definition, sorry, and assessment in telecom, especially in North America for at least 18 months. We mentioned this to you at the last Capital Market Day, and there are shows following that Capital Market Day that we wanted to strengthen our position in telecom. We reached out to at least 12 targets in the last 18 months. Some were European with some strong presence in the United States. Most of them were US-based because the US is the largest market, as I said before. It is important to strengthen our position in Europe, but it is ultimately important to strengthen our position in telecom in the United States. We came across three or four or five opportunities in the US, viable in terms that they were willing to sell.
For different reasons, price, good fit, a lot of different things. We singled out Channel because it was the best fit. It was the best fit in terms of size. It was the best fit in terms of complementarity to our portfolio. It was the best fit in terms of financial sustainability. We did not want—we had another target, large. You can also imagine who it is, but with a lot of financial debt that they were willing to offload to us, and we were not willing to receive it. Channel was the one that met all, tick all boxes. Now it is because, I mean, targets become available when they become available, and when they become available, you have to accelerate and make them a real merger. We started talking to them in June. I reached out to him. Bill Channel is the owner.
He's a family-owned business in June last year. We got together, we understood each other, and we offered a non-binding price in December. The last three months, we spent on the due diligence and the merger agreement. Here where we are.
Thank you.
I think [crosstalk] there was a question. We'll be back in other hands there.
Hi, Chris Leonard from UBS. Thanks for taking. I've just got two questions, if I may. The first is on the target for €3 billion or so of EBITDA by 2028. If I do the numbers, it seems to me like the electrification margin maybe will be below sort of 10% by 2028 if we take into account power grid staying at 12%-13% and the growth in transmission as well. Are those the right sort of numbers to be thinking about for electrification? Does that imply the on-call margin is slightly reducing out to 2028? I'm just trying to get clarity there, as I think you said in your remarks, you'd see stability on margin. Just trying to understand electrification to 2028 on low voltage.
Thank you. I think I've been pretty explicit on the margin of transmission because we count on solid backlog. We have all the conditions in hand to deliver the growth in EBITDA in margin percentage. I also said that I'm comfortable with a 12%-13% level of margin in power grid. I also told you that we played a more moderate growth in the organic growth of the electrification business. That doesn't mean that we foresee a reduction of margin in on-call wire. Actually, I said that I will see in mid-long term margin are sustainable. Sustainable means that they will be in the range of 14%-15%, which is what we have seen since December. In quarter three, the margin were 15%. In quarter four, they slightly dropped to 14.6%, by the way. The quarter four INC margin in North America was 14.6%.
There is a softening, it is right. We did not build our plan on a significant rebound of volume and margin in INC because we want to keep it as a buffer. Because we want to deliver the €3 billion and €50 million by all means. That is why we committed to it. If we had additional opportunities upside coming from volume and maybe the margin improvement, we will beat the €3.05 billion. By the way, the top end of the range is €3.15 billion. This could be what can bring us to the €3.15 billion.
Okay, super clear. Thank you for that. Second question on the capacity additions for transmission, is there any sort of guidance you can give us on the CapEx we should be expecting there on transmission to support that EBITDA CAGR of 25%-28%? How are you seeing with that new capacity coming in, how are you seeing the supply and demand picture as well in high voltage in 2028?
We are no different from what we told the market at the last Capital Market Day, more or less in the five years from 2023 to 2028, we will inject EUR 2 billion of capex in transmission. We removed the investment in Britain Point in the U.S. We omitted it. It does not make any sense. When we make mistakes, we omit it. The market did not start, did not take off, not because of Trump, guys. It is because already three years ago, we thought it would develop, but in reality, it did not develop even under the Biden administration. The U.S. is working more on electrification, which obviously, in my view, makes much more sense than what Europe is doing, investing in generation and also electrification at once. Impossible to sustain it. Capex are EUR 2 billion.
We removed an expensive investment for one brand new plant in Brighton Point, Massachusetts, and basically replaced all of it with incremental investment in Europe, which is where the market remains and strengthens and where the market grows in the coming years.
I see Vivek from Citi.
Thank you very much, everyone. Good morning. It's Vivek from Citi. I have a couple of questions on digital solutions, if I may. The first question is a follow-up regarding Channel. You've alluded to the better margin in Channel. You've given us an absolute EBITDA number. It'd be quite interesting to learn what the margin is. Could you also give us a little bit of background on has that margin been stable over time, or has there been an improvement in recent years? Thank you.
I do appreciate that everybody's concern is whether the margins are sustainable or not. It's a key question, and we receive it every time in the investors' meeting. We can tell you what we see, and we don't have a crystal ball for the future. What we see is, first of all, in connectivity, the margins are high, not only in Channel. We have connectivity business in our core business in Europe and in IPAC. The margin that we have in connectivity in our legacy perimeter is more or less the same that we see in on-call. Sorry, in Channel. I still back with the old acquisition. The margin in Channel is more or less 35% EBITDA. You can work out. You have the price, you have the multiple. You can work out the EBITDA.
Now you can work out also the EBITDA margin and also the revenue.
Fully understood. Thank you. My second question, again, on digital solutions, a bit broader. It's a bit more, we sometimes get questions given some of the news flow in the U.S. and some of the political chatter. There's, of course, Starlink and also more broadly the questions around the BEAD program. I'd just be interested in some of your thoughts around that. Thank you.
No short understanding.
The question, Vivek, is around the current trade and developments in the US on the digital solutions piece of market developments in the US specifically for digital solutions.
It is rural. I think the concern is probably about the rural broadband, which is certainly not what we factor in in our main plan. Because there will probably be some rural broadband subsidies. They have been talking about it for many years, and we did not see any significant opportunities there happening. The real growth that is happening in North America is the fiber to the home, fiber to the exit, fiber to the data center. Already 45% of our volumes of optical cables in the U.S. are based on data center expansion. They are rich cables. They require high-density fiber. It is a market growing very fast. There are long-distance connections in data center expansion. We do not count much on fiber to the home rural broadband as we count on fiber to the home deployment in mid-cities, large cities and mid-cities.
I mean, the U.S. is already only at 35% of deployment of the fiber to the home, not because they're lacking rural opportunity, but because they're lacking mid-size cities and all the rest. Data center will add additional demand on it. Thank you.
I see Akash. Akash. Akash from JPMorgan. Can you please bring the mic?
Okay. Yes. Hi, good morning, everyone, and thanks for your time. I got two questions. The first one is on margin. Monsignor, you said in 2028, we could be above 12%. Last year, we were at 11.3%. When we look at the moving parts, you have margin improvement, significant margin improvement in transmission, significant margin improvement in digital solutions, some normalization in power grid, and electrification largely stable. The question I have is more for when we look at your presentation today and especially screening on innovation, where you highlight these new areas where you are going into, and also a little bit following up from Daniela as well, that more on service side. If you target higher vitality ratio in the future, what is the upside from those new innovations on margins?
I mean, I think Srini talked about a couple of those, like this new groundbreaking technology in subsea cable that I think could be really revolutionary. Same thing with these overhead wires. Maybe a question about on margins, because there is a debate, but then there are moving parts. How do you see role innovation playing in margins by 2028 versus where we are last year? That is the first one.
You know, Akash, if you look at our last four years, you've seen our margin growing from 7% to 11%. Part of it is due to the market is growing, is more demanding, and there's more imbalance, especially in transmission between the existing capacity and the available and the current demand. Some of it is because we leverage this innovation already. We already leverage sustainability, pricing differentiation, service as a way to increase margin. We were at 7% in 2021. We grew to 11% last year. I agree that 12% might not be reflecting the full potential of this company. You like, I think you will appreciate our style. We want to set targets that we are confident to deliver and hopefully outpace these targets. I'm pretty confident that this will be the case in 2028.
Thank you. My second question is more short-term questions. Last month at Q4 results, when you admitted that there is some price pressure in Encore Wire, you told us that you expect improvement from March onwards. Now we are end of March. Can you confirm if you have seen improvement in Encore Wire price or will it take more time than what you previously said? Thank you.
I had to wait to answer this question. Either I do it myself or I ask the person behind you, which is the CEO of North America. You can answer this question. I would love to have a combined answer. He told me and he showed me that in the last month of March, different from what happened in November, December, and more importantly, from what happened in January and February, where price pressure was still very high, in March, we've seen a strong rebound in profitability. Of course, we had to be much more selective in the market. We were not chasing volume for the sake of volume. We were holding price nicely. Finally, also those who were creating pressure in the market, I cannot name the company, but you can figure this out, have come to terms and said price improvement in the market.
That's why March looks completely different from November and December and from January and February. I hope this, maybe anticipating your next question, that this is a trend, this sets a new trend, which will bring the level of margin in line with 15%-16%, which is what we delivered in quarter three last year. March itself, it's already at the level of margin that we've seen in October and September last year. Sustainability of margin depends then on the seasonality effect that we see starting in March and April as we enter the high season. Again, don't forget the usual theme, the balance between capacity and demand, which I think will remain favorable to the supplier side.
Thank you.
Welcome.
As there. Okay. Then.
Yeah. Thank you. Good morning. Alasdair Leslie, Bernstein. Just a couple of questions. One on the US listing, you said that was paused. I think it has put a little bit of pressure on the share price. Do you sort of see that largely just as a sort of timing issue? This is maybe something you can return to once, I think, if Channel completes in Q2, you can come back to this. Do you think there is maybe a higher chance now that this does not happen at all? The second question on data centers and digital solutions. You sort of said in the past here, or you acknowledge that perhaps you were a little bit kind of underrepresented here.
Does Channel, with the acquisition from Channel, does that now give you everything you need in digital solutions to really pursue all the opportunities in front of you there? Or do you need to continue to kind of innovate and develop organic and perhaps still do some bolt-on M&A deals here as well? Thanks.
There were two questions.
Our question is US listing. Yes, we paused because the time is not ideal. We said that we recognize the greater value creation that can be unlocked thanks to this US listing. The board is here with us. They can also help me answer the question, but we will revisit this opportunity in a few months as we get on with the closing and the first step of the integration of Channel. The closing is foreseen to happen before the end of quarter two. Luckily, this is going to be May or June. At that time, we will review the situation of the financial market first. Because once we do it, we will not fail. We believe that we are serious about these things.
We have to be sure that we have all conditions internally, more importantly externally, to be able to gain value and to be successful in that move.
Second question was on digital solutions and the strategy we want to pursue there. If Channel is complementing our portfolio, helping us to grow, or if we are still looking for further M&A to further complement the portfolio.
You should be satisfied with two M&As in one year, guys. We have a very ambitious agenda in M&A because we built this company thanks to M&A, thanks to the organic growth, thanks to the resilience. The M&A opportunity is where we create incremental value. It is not simple to find available targets. It is not simple to find available targets in companies that are for sale. It is not simple to find the best fit with our footprint. Our footprint is not just the cable footprint. It is also the cultural value of these companies. It is very important for us that we find a cultural fit. It does not mean that we have a culture equal to ours in the company that we buy. We have to make sure that when we acquire General Cable, we said one plus one makes three.
Now with Channel, the owner of Channel told me one plus one makes 11. The fit is essential. We will continue scouting the market for new opportunities. We need to have the fit. We need to have the availability. We have the financial ability to do it. I think for the next two years, I do not say we paused, but we will further invest in identifying the proper target. Now we close a big gap that we have in our portfolio. Two gaps. One was Anker. We were not a player in the electrification space in the US, ticking the box. We had another gap. We are not a solution provider in digital solution space in the US. Channel closed the gap. We do not have any major gap left now.
All we will do in the future is to find something else that can complement the portfolio, increase our leadership in geographies, in different markets. All gaps that we had have been closed.
Thank you.
Thank you.
Thank you to Uma from Bank of America. Thank you for taking my question. I just have one, please. On power grid margins, I guess you're investing a bit more into the US. If I understand correctly, your US margins are significantly higher than Europe. How should we think about the margin dynamics, given you have guided flat in the next few years? I have thought the US growth should have lifted the margins a bit further. Thank you.
The question is about power grid margins. In any case, we are saying that the US market has higher margins, but we are guiding for flattish market on power grid. The expectations were for margins to continue to grow given our also investment in the US power grid.
I take it. First of all, I think that our target of mid-single-digit growth in power grid is both in the US and in Europe. Also, Europe is clearly an opportunity in terms of growth. I do not think that there is a big mix effect on that. Having said that, your remark about the differential between EBITDA margin in North America and Europe for power grid is certainly there. We are on the safe side, as we explained. We have decided to embed in our financial targets, let me say, minimal normalization of price and margins. This means an EBITDA margin run rate between 12%-13% versus the 13.4% which was achieved in 2024. We think it is quite safe. It could be, we hope it will be, conservative.
We hope, and we think it's also well possible that margins remain stable both in the U.S. and, by the way, could improve in Europe because the gap, as you remarked, is pretty significant. This will potentially play on the top part of our target range. Welcome.
Joshua and then Akash again, Morgan Stanley.
Hi, thank you. It's Josh Miller from Morgan Stanley. Just a first question going back to something Cris was asking on the high-voltage supply demand environment. In the past, you've talked about longer term this being 30% undersupplied. Since then, we've maybe seen a bit of a step up from Asia competition in terms of expanding capacity in Western markets and also maybe a weakening of the offshore demand environment. I guess if you were to take a step back and reevaluate that statement, that view, what would that look like today? I'll start with that question.
You know. The market is still stronger. Of course, the imbalance will reduce because everybody has invested in this capacity. Like what happened in power grid, everybody has invested in medium-voltage capacity in the United States. That's why capacity is not enough to lead and maintain market leadership.
That's why innovation is a key element, which might not result in incremental margin increase, but it will result in becoming more cost competitive, more cost effective, and more competitive in the market. One day, there will be a full balance between the transmission, demand, and the capacity. This day has not come yet. It is probably likely to be 2029, 2030. Bear in mind that our capacity is already sold out through 2029, 2030, 2031. For the next three, four years, we will live this imbalance in capacity between the capacity and demand, imbalance in the market between capacity and demand. Remember that in transmission, it's not just a matter of cable manufacturing capacity. You are Chinese, you are Koreans, you are LS or Anton, whoever. They come to Europe with a lot of capacity in transmission. They're also qualified with 525.
While they are qualified with 525, we already work on the 600 kV solution, as we already do have it. We also have 700. We own it since 2018. When it comes to installation, they do not have any own installation vessel that works in Europe. That is why, despite the significant imbalance that we had in the last four years, you have seen probably only 5% of the market demand in transmission satisfied with Asiatic players. It is not that we do not like Asiatic players, so do not get me wrong. You need to have a full spectrum of capabilities if you want to succeed and remain in this market. I do not see them creating or gearing up their company to the full spectrum. The market demand will be balanced one day with capacity, with cable capacity. It will never happen that we will have other competitors with global capacity, capability in terms of installation manufacturing in this market.
This is what we will leverage to remain competitive and to gain market share and maintain our margin side.
Amazing. Thank you. Just a second question again, sort of linked to high voltage. You're now guiding for sort of an 18%-20% margin for 2028. That's what it sounds like. I mean, when you look at new orders, obviously, you had some new orders at the end of last year. When you look at these new orders, you're still taking in. Is there room for this to push higher in the sort of out years beyond 2028? Do you feel like this is now the right level for this business of going beyond into that mid-long term?
I think the question is, Joshua, if I get it right, is we are targeting high teens on the EBITDA margin for transmission in 2028. If we see the incremental project we are taking now, there is room for further expansions considering everything we are discussing.
We have already this project with high margin that's EUR 16 billion. That is why we think that with the execution, with the good execution, we will raise our 15% EBITDA margin transmission of 2024 to 17-18%, theoretically to 20%. I can tell you, we have a margin in our backlog that is as high as 20%. We still have to deliver, true. If you look at the margin, it's already at that level, 20%. Today, we are still winning projects at very high margin because we are not yet there in terms of balance between capacity and demand.
I saw Akash, and then we have.
Yes, hi. It's Akash again from JPMorgan. A couple of follow-ups to Francesco. The first one is on Channel deal. I think when you acquired AnkerWire, you gave us what sort of EPS accretion you are expecting from AnkerWire. Could you quantify what sort of EPS accretion we should expect from Channel? The second one is the bridge between EBITDA and EPS because last time when we had previous Capital Markets Day, you did not give us EPS guidance. This time around for 2028, you have given EPS guidance. Maybe if you can talk about the big ticket items that go close from EBITDA to EPS so we can see what's your assumption behind some of these lines. Thank you.
Okay. Let me start from Channel, not Chanel, just to avoid it. Even if margins are high, but maybe not that high.
The quality of the pro duct.
Actually, I don't know the margins of Channel. I will check. Apart from jokes, I think we have been in our press release quite explicit on the way we will finance that. We come from a very large acquisition in 2024. We are very keen on maintaining our investment grade, of course. We have decided to go for that ambition, but at the same time, to finance this in a quite prudent way. This quite prudent way is what I try to express in the press release as a balanced mix of equity and debt in principle and equity provided by some disposals of the treasury share. You remember that we have just completed our share buyback in Q1 2025. We have a quite significant portfolio of treasury shares. At the same time, we plan to tap the capital market with a hybrid.
To be very clear, an hybrid is not a convertible. An hybrid is a subordinated bond, which will not result in issuance of new shares. Still, normally, the interest rates of subordinated bonds are slightly higher, not massively higher, slightly higher than a senior bond, let's say 100, 150 basis points higher. Boiling this down and putting all these in a pot, I think this still will result in a certain accretion, a slight accretion, let me say a one-digit accretion of EPS coming from the Channel acquisition. Talking about the 15%-19% EPS CAGR, which will convert in terms of adjusted EPS substantially within the midpoint, is very realistic at EUR 5 a share, 4.9, let's say EUR 5 a share. You have visibility on the EBITDA.
The adjustment below the adjusted EBITDA line will definitely decrease because in 2024, they were particularly high on the back of digital solution restructuring and also all the transaction costs and also some PPA effects related to the AnkerWire acquisition. This will contribute to the growth of the net income. Our D&A, I'm trying to comment, Akash, on the most important items. Our D&A, reflecting the ongoing increase of our capital expenditure plan, will definitely increase. By the way, we have reflected in the D&A increase all the effects related to the purchase price allocation of AnkerWire. I want to be clear, the additional D&A coming from the purchase price allocation is taken into account in our EPS growth. Our D&A will increase significantly up to a level, I believe, between EUR 600 million-EUR 650 million from the current EUR 460 million in 2024. What else?
I think the financial charges, of course. The financial charges will increase this year because we'll have the full year effect of the AnkerWire acquisition financing. The cash generation is so strong and the deleverage will kick in so quick that we think that from a level of EUR 260 million-EUR 265 million financial charges this year, this will drop in 2028 well below the EUR 200 million threshold. Last but not least, the tax rate, quite stable, 26%-27%, depending on the year. This will actually drive a net income that, including Channel, we see consistently with the midpoint of our EBITDA range in the EUR 1.45 billion, somewhere there. Of course, that's the midpoint of a range.
I see Matteo.
Matteo from Kepeshevo, a question for Pier Francesco on the link between free cash flow and working capital. In 2024, you generated $1 billion free cash flow, but more than 40% of that was working capital, which makes sense because in 2023, you announced big order and you took the advance payment. My question is basically, over your plan, what are your assumptions for these items of the working capital also in relation? That is the second question to your projection of $15 million-$20 million intake per year, which is a big number for transmission because some of your peers guide more $10 million, $10 million-$15 million, and not $15 million-$20 million. I would like to know a little bit more. First of all, the composition of these $15 million-$20 million across Interconnector and offshore wind, if you can provide a little bit more color.
Second, in relation also to the intake in high voltage, the dynamic of the working capital to understand if it's going to continue to play a big role in your free cash flow. Thanks.
Thank you, Matteo. Very, very interesting question. Our journey, our move from $1 billion to $1.6 billion, basically. Let me say, first years or the central part of this period of time will be a bit in the growth, will be a bit burdened by the increase of working capital related with transmission. Basically, the deployment of the additional capacity and the acceleration in project execution will drive a quite significant increase in working capital, which is embedded, of course, in our plan. In the last part, let me say, in the last year, basically, of our plan, as I explained, we think it's realistic to see a substantial balancing between down payments and further growth of the working capital, talking about transmission. That's good because you are totally right.
Differently from 2024, where our free cash flow was boosted by, you mentioned, there's a 40% component, which was coming in principle from customers' down payments on transmission related to 2024 and even more to 2023, the 2028 will definitely be much more sustainable. This growth will happen in steps, let's quantify them, of $150 million in the first two years, $150 million in 2026, $150 million in 2027, and then a stronger step around $300 million in the last period of our plan in 2028. Maybe I didn't get exactly the same.
There are the assumptions, I think, on the working capital coming from transmission, considering that in any case, we are considering a 15-20 billion market, which is higher than the estimate of our peers because they are guiding from a lower market in between the 10 and the 12.
On working capital is what I was commenting. We are reflecting a decrease in down payments because this is embedded in our targets.
My question was 15-20 billion. How did you build that? Because it's different from what your peer typically say. Where did you take this assumption? How did you build this assumption?
On the market evolution, the 15-20 billion market size since the estimates is, again, higher than not necessarily Matteo because some of them are talking about addressable market. If I think about smaller players which don't have the same coverage that we have, they are targeting the 10, 11. We have other competitors that are even talking about 26 billion. At the end, we are taking a more balanced approach. In our case, and then Massimo, of course, you can complement, it's a bottom-up. What we are seeing is the pipeline of projects and the framework that we see coming. If you do this exercise, of course, you also end up with higher numbers, which is not far from some of the other competitors. We are taking a more prudent approach, lowering a bit the estimates.
I do not know, Massimo, if you want to.
We see the pipeline of projects from customers. They already given us a lot of volume to cover revenues for us and other competitors through 2030. They are launching 25 in 26 projects. We will be executed in 2031, 2032. We have this visibility and the comfort that they are working on this project as we speak. 15-20 million is our best estimate, bottom-up estimate, how the demand of intake over the next five years.
You're welcome.
Hi. Simon from Barclays. Thank you for taking my questions. My first question is on medium voltage. I remember back in Q4, as you were launching the 20,000-pound new capacity onto the US market, you were very transparent about some margin softness that you see on the spot market. Now you have this new $245 million investment in medium voltage in the US ramping up from 3Q 2027. Can you give us a bit more color on how you're comfortable with the 12-13% margin with more capacity? Maybe in particular, how you see the competition landscape in the US, given your biggest competitor here is a private player who do not really have a lot of visibility on how much capacity they're adding. Thank you.
I'll try to sum up because unfortunately, the audio is not ideal.
The voltage, medium voltage, US or only?
Medium voltage. I think.
Only medium voltage.
Also because you were mentioning capacity expansion from other competitors. What is the impact of the overall evolution or our margin is driven by the capacity availability on the U.S. market, right?
It is power distribution. We have low voltage cables for the grid and medium voltage cable for the grid. The market is high in demand. Over the last three years, everybody has invested in capacity. Different from this everybody, we have a three-channel to the markets in this space: public grid, utilities, renewable business, and public power distributors. We are better positioned than the others to lever this three-channel to saturate our capacity. It has increased significantly in 2024. In 2025, we will continue to increase. With the new investment approved last night, we will further expand it. We have three channels to play with.
The most difficult channel to own and to retain is the utilities channel. Utilities, I mean, I think you explained it before, the most conservative customers in terms of cable specs. The most demanding customer in terms of service. Service matters. Service means you have to have cable in stock to deliver the demand in the shortest possible time. You have to have security supply. You have to have qualifications to enter in this space. That is why in this space, we have a frame agreement. There are contracts that last three, four, five years. Most of the time, if you performed service-wise and delivery, they do not even go out for a new tender. They just extend these five years by one or two more years. That is why this is the most difficult space to possess.
On the other hand, we have renewable projects as a spot business. The tender projects, you can win or lose, and you move on to the next opportunity. Public power is the equivalent of a distributor for electrification space. They buy spot. It is easy for all those competitors to remain players in renewable and in distribution in public power. In fact, I am aware of one large competitor in the US that has tried for 10 years to enter in utilities. They are not yet there. We have this beauty. We can play on this three segment. We think we own all the assets and capabilities to succeed in this space, no matter what is the balance between the existing capacity and demand. We will have one chance more than the others to remain high in volume, in saturation, and in profitability.
Thanks very much. My second question is on the vertical integration of Channell. Channell.
Chanel.
Sorry.
Channell is very nice.
One day. Fiber optics is the most important or expensive part in the telecom cable. I think in European market, Asian import makes up a lot of the supply given their cost advantage there. Is this the same in the U.S. market? If so, do you think how do you see tariff play?
In Europe.
Is it here?
Why is U.S. tariff?
That's the question. U.S.? If Swiss is in US, it's a dynamic.
US is a protected market, not only in terms of optical fiber, but it's across the board. We don't have a Chinese player in the US. We have some Indian player, one Indian player, very minor, which is, by the way, struggling. On the contrary, Europe is open to fibers and to other stuff imported from Asiatic players. As the US is already super protected, also Europe is becoming more aware of raising fair barriers to this unfair competition because the digital network alongside the energy network is a critical network, is a critical infrastructure for US as it is critical for Europe. Europe is becoming more aware. We succeeded two years ago with our anti-dumping case for Chinese imports into Europe. Tariff as high as 25-40% has been applied since then to Chinese cables imported into Europe.
There is another case that we filed two years ago for fiber importation into Europe. Gradually, also Europe, we raise this obvious protection towards the local producer. The U.S.A. is not protected by this tariff, additional tariff that the tariff is set. Already, there is little share of the current market U.S. across the board, transmission, voltage, power grid, electrification, and digital, where foreign players can play a small role.
Thanks very much. My last question, if I'm allowed, is on the transmission market size. You commented on this $15 billion-$20 billion that you expect between 2025, 2030. I saw the APEC bar is growing. Obviously, previously, you already commented on transmission business being a global market. I'm just wondering, and recently, you were selected as a preferred supplier for the Malaysia to Singapore link. In this market, what specific countries maybe do you have in mind for this growing?
I caught the first part of the question on the last part. The market is foreseen at $15 billion-$20 billion. 85%-90% of it is European market. U.S. is, as I said before, not in the position to be a player in this market because on the one end, they do not have the needs of investing offshore wind. They have plenty of space onshore, and they are investing a lot in renewable onshore and solar onshore. Why would they spend or embark on an expensive project offshore to generate the same quantity of electricity they can generate green in onshore application? Secondly, they do not have the, as I said, the morphology of Europe. Europe, all countries are surrounded by sea. The fastest way to deploy high voltage long line is to go via sea and not via land. In the U.S., it is the opposite.
They are using the overhead lines because the density of population is very low. Nobody's disturbed by these high overhead lines. Overhead lines is the best way for the US to transmit the green electricity across the state. The US will never become a sizable market in submarine space or HVDC land underground. APAC is an important market for us. China, we cannot enter in that market. We're not allowed to participate in bids in China, and we don't even want to. Europe and APAC have two important markets for our global presence in transmission business. I don't know what I was at last.
Yes, I think that was the right question. You were addressing both points. Thank you. I see.
Hi. This is Andrea Carcina from Federated RMS. I have a question for Srini. I really enjoy your presentation. Can you help me understand how you allocate capital? Because I'm sure you have plenty of projects, right, where you can invest in. How do you think about which one you want to prioritize? Is there any financial KPI in mind? Secondly, it would be interesting to understand if some of the innovation comes from clients coming to you and asking for X, Y, Z, or you going to them with sort of like a breakthrough innovation. Thank you. D o the second one if you want to.
Let's start with the second one.
Oh, it's easier.
Yes, we have customers coming to us. More importantly, we are proactive in this approach.
P-Laser technology, the one we highlighted, the world was not asking. It was our idea, and customers embraced it. You have ideas or E3X, same thing. It was something we envisioned in our labs, and customers are embracing it. You have other solutions like the automated splicing and a whole bunch of other things where customers are seeing the need. Quite honestly, it's a luxury to have the second part because things go faster. It's really a good mix of both for us. Yeah.
Yeah, now when you innovate, and you are the only one providing this solution to customers, some customers want to have a double source. This is when innovation is not enough to penetrate a customer. Again, when medium voltage P-Laser solution was invented, customers were reluctant because they could not find the same alternative among other suppliers. With time, you break this barrier, and you are really able to push your innovation through all customers.
Absolutely. I think the question was also around how we allocate resources in terms of where we decide to invest in terms of innovation.
I would say to comment this that we are definitely selective in terms of projects that we are keen to take and to follow. I think that the split of our backlog, which is very focused on the TSO and much less focused on developers, for instance, financial developers, is a clear indication for that because we definitely believe that there is much more risk to go after projects with developers in terms of uncertainty of the timeline and also potential uncertainty about the project. In terms of we always try to balance and to look at both the margins and, of course, the terms and conditions of the contracts, which are important because they reflect directly on the level of risk. It's a part of the level of risk embedded in a project.
Having said this, I cannot say we are, how can I say, strictly applying financial parameters in taking our projects. No. We have also to consider that the cash flow dynamics, the cash flow profile of the project business, of the transmission business, is a very good one, is a very strong one for the simple reason that early in the life of a project, we get the down payments. We have pretty large milestones that we collect. This creates a situation where the working capital before coming, obviously, to a balance at the end of the project is basically positive throughout the life. Also this has to be taken into consideration in order to decide whether to go after a project or not because something is margin. Something else, of course, is the return on capital, which is extremely strong in the transmission.
In principle, you could even think that a part of the large CapEx that we have on transmission, it's approximately one half, close to one half of the total €2.6 billion that I was, is financed, is covered by the positive profile of working capital and the down payments. You can also think it this way.
Welcome.
I know we have time for a couple of other questions, if any. I do not see questions coming from the web. I am not too sure the device is working. It sounds strange to me.
People are shy.
We have been very long.
A question?
Okay, sorry. Vivek.
Thank you very much, everyone.
My pleasure.
Just another follow-up, if I may. I can see on the appendix, you've not assumed an impact from import tariffs. I was just following up again on that question. In terms of the pass-through mechanisms, it would be great if you could just walk us through how those work, maybe by business, particularly around some of the metal tariffs that have been proposed recently. Thank you.
Congratulations because you were carefully reading the presentations, appendix included.
It's a strange situation. It's an odd situation, this one. I think correctly, Trump is trying to promote local production for local business. In some cases, probably it is taking some bias towards I want to put tariffs no matter what. The metal tariff is exactly this case. Now, why would you put tariffs on metal, aluminum rods, aluminum, copper, when local production in the U.S. is not enough to supply, to deliver all the volume required by the local demand? The U.S. is not self-standing in terms of aluminum and copper production. In the end, we are in the same boat as the other competitors. We all resort to third importers, third-party importers, some from Canada, like us, some from other regions like Latam or Middle East. He put barriers of 25% against them all.
It means that we will naturally and probably very quickly transfer this to the market. Even before tariff came into play, the Midwest premium, which is the transformation cost applied to the aluminum metal to reflect the transformation from ingot into rod, has increased, has started increasing in January this year. As soon as he mentioned, I might think of putting 25% on Mexican production or Latam production or Middle East and Canada, Midwest reflected this increase. Since January, we are already in the condition where we work to pass on this cost increase to the market. This will, in the end, unfortunately, result in one backfiring situation. The cost of everything will increase. This will lead to inflation. Obviously, at a certain point, maybe before it's too late, the market realizes that these tariffs are not going to help the local production.
We are also working to make sure that the administration knows that besides applying tariffs to pure metal, they also apply tariffs to products, cables that are imported from ASEAN, ASATI players or Korean and so on, which can bypass the tariff because cables is not a metal. There you see the inconsistency. This can actually turn pretty soon into a significant competitive advantage for the local producer once he added tariff to the products, not just to the raw material.
Thank you. I think we are unfortunately running out of time.
We are 10 minutes late on our schedule. It's probably my fault. I overran by a few minutes, and then we all follow suit.
Everybody's fault.
Thank you again. Some of you will join us with a tour to AnkerWire. You will see how large and impressive this site is. Some of us will return to your location, and I hope to meet you soon, really.
Thank you.