Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Snam first quarter 2023 consolidated results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Francesca Pezzoli, Head of Investor Relations. Please go ahead, madam.
Good morning, ladies and gentlemen. Welcome to Snam Q1 2023 consolidated results. Today presentation will be hosted by Snam CEO, Stefano Venier, and by our CFO, Luca Passa. During the presentation, Stefano will provide you an overview of the results and the key highlights of the period. Luca will walk you through the financial performance, then back to Stefano for closing remarks, and finally, the Q&A session. Now let me hand over to Stefano.
Good morning, ladies and gentlemen also on my side. I'm on slide two to start the presentation. Volatility continued in Q1. Gas demand declined by nearly 20%, while gas prices experienced some stabilization. 46% below previous year level, still nearly 2x pre-energy crisis level. Gas flows continued to be impacted by the geopolitical situation, the volume decline from North was offset by a 35% increase of LNG import and lower demand. On the regulatory front, we had two new ARERA resolutions. The first, the number 139, sets the criteria for gas transportation and metering services in the 6th regulatory period that goes from 2024 to 2027. More importantly, it confirms the four-year duration as well as the gearing and beta parameters.
The second resolution was the one, the number 163, that defines the general rules for the ROSS base implementation, supporting a smooth transition. Details, such as capitalization, efficiency, sharing rates, will be defined after consulting period. We have just completed the submission of, to the regulator of the output-based incentives on the fully amortized assets based on the asset as methodology. We expect the full year contribution according to guidance with reactive effect since January 1st. First quarter results were solid. Investment at EUR 313 million were up 5% year-and-year, supported by the first floating vessel interconnections. EBITDA was up by 1.5% or EUR 9 million year-and-year, notwithstanding positive non-recurring items of EUR 13 million posted in Q1 2022.
Net profit reached EUR 301 million, down 7% year-over-year, affected by higher depreciation and amortization and higher cost of debt, while associate delivered stable contribution. In April 2023, we closed more than EUR 2 billion of sustainable financing, supporting our solid financial structure, as Luca will provide more details later on. In end, on April 4th, along with the other core shareholders, we successfully placed 5.7% De Nora shares via an accelerated book building to increase the free float, supporting the potential share re-rating. The cash in from Snam reached approximately EUR 145 million, and the capital gain about EUR 76 million to be booked in Q2 2023. Moving now to slide three. Beyond the financial performance, we have progressed in delivering along our key strategic milestones. We made some sound progress on key security of supply projects.
First, we received the green light by ARERA on the Adriatic Pipeline, which is also eligible for public financing. Second, the Golar Tundra started its commissioning on May the 5th and will start operations by the end of May as planned. All the capacity was sold for the first three years and 86% for the remaining 17 years, confirming the strategic role of this infrastructure for the entire Italian system. OLT capacity was fully booked via auction until 2027, and we have the 20% booked for until 2029. Regarding storage, 1.5 BCM of reverse flow capacity was sold in Q1, contributing, along with gas demand decline, to keep storage levels at approximately 65%, well above last year.
With respect now to energy transition, the South H2 Corridor that is promoted by Snam, among others, was presented to the EU within the project of common interests. A few days ago, the project got support letter by the Austrian, German, and Italian government that was sent to Europe. We further progress on third party appraisal of H2 readiness of our network, with now more than 1,100 km of pipes certified by ARERA towards our 3,000 km target set by 2026. Modena H2 Valley, the development of a green hydrogen production hub jointly promoted by Snam and Hera, was awarded EUR 19.5 million in funding that covers 100% of the investment as part of the National Recovery and Resilience Plan.
We were also awarded by EUR 15 million for the realization of eight hydrogen refueling stations. We participated in De Nora, just started the realization of the gigafactory nearby the city of Milan. Moving to sustainability, CapEx aligned to taxonomy and SDGs represent respectively 30% and 46% of the total. We monitor the performance of our ESG scorecard KPIs on quarterly basis, you can find it in the appendix of this presentation. We are very well on track to reach the full year targets. We have done an extensive engagement with the key shareholders ahead of the AGM, which resulted in an average approval rate of 97% on all the items. According to a recent analysis, ESG investors represent more than 40% of our institutional investors base, well above the sector and Italian average.
Let's now move to slide four and take a European perspective. Europe and Italy are extending measures to promote security of supply, which remains a key priority, while policies to favor decarbonization and affordability are progressively being outlined and implemented. Let's talk about storage capacity. The storage filling obligation of at least 90% by the end of October this year was confirmed at European level, and emergency measures to voluntarily reduce gas demand of 15% at national level were further extended to March 24th. Moreover, on April 25th, the European Commission launched the process for European companies to register their gas purchases needs via the aggregate EU mechanism, a key milestone to refill EU gas storage facilities in coordinated and timely manner.
The news that you find on the paper today is that 77 companies registered in this mechanism for a total demand of 11.6 BCM, as the Vice President, Šefčovič declared. Under the current REPowerEU discussions, some of our key security of supply projects, such as the Adriatic line, new LNG terminals, further reverse flow capacity, could be eligible to receive REPowerEU funds in the form of grants and concessional loans, thus reducing the overall cost for the system. Looking at affordability, as far as production is concerned, the recently announced EU Hydrogen Bank will support green hydrogen production and import, while biomethane in Italy already enjoys a favorable incentive scheme, providing 15 years feed-in tariff coupled with grants. The RED II delegated act has outlined certification rules that are conducive of centralized green H2 production model.
This is consistent with the results of a new H2 backbone study promoted by major European gas TSOs, which estimates EUR 330 billion cost savings over a period of 30-50 through a Pan-European H2 network. The third angle, that is sustainability. The Net-Zero Industry Act, launched in March, proposes a framework where green hydrogen, CCS and biomethane are defined as strategic technologies for strengthening a competitive net-zero ecosystem in Europe. A new European CCS strategy is expected before year-end. Both our CCS project in Ravenna and SouthH2 Corridor could be then eligible for EU funds. We are following very closely final negotiation on Decarbonised Gas and Hydrogen Package, aimed at assuring that green gases will contribute to reach the EU energy and climate objectives.
It's expected to be finalized before the year-end and will define the framework for hydrogen infrastructure and the role of gas TSOs in the future hydrogen system. Let's have a look now on the development of gas demand in the first quarter of 2023. We are on page fiveh. With regard to gas market context, Italian full year demand was down by 20% due to thermoelectric sector, down by 22.7%, driven by gas to other fossil fuel switch. Electricity demand decreased by 0.7 BCM and raised in net electricity imports. That was the major contributor in this decline. Civil sector contracted sharply due to the milder temperature and to demand containment actions. The vast majority of the Q1 decline is not structural, as driven by mild winter, 1 BCM, and containment measures by 0.7 BCM.
We had a significant decline in industrial sector in line with what was observed in previous quarters. Preliminary data for April points to a mild decline versus last five-year average, with signs of recovering the industrial demand. Last year, gas demand proved to be quite resilient in the first half and started to decline severely in the second part, impacting year-on-year comparison. Moving to gas flows, they were impacted by the geopolitical scenario, with 48% decline in volumes from north, compensated by higher LNG volumes, +35%, and lower demand. At European level, in Q1, we had 15% increase in LNG imports, or 2 BCM, and we reached the record high daily deliveries of LNG in April, with US still the first exporter.
Let's move now to gas storage facility on slide six, which are strategic in the security of supply and, let me say, also in the development of the prices in the forcoming months. At the end of the terminal year, March 31, 2023, the stock in the storage was approximately 5.4 BCM, that together with the strategic reserve, corresponds to a filling level of approximately 60%, well above the previous five-year and last five years average, as you can see on the chart.
In April, storage was filled up on a regular basis, with quantity injected in approximately 1.1 billion CBM and stock at the end of the month of approximately 6.5 billion CBM , which correspond, together with the strategic reserve, to a full filling level of approximately 65% above the European L average that hovers around 60%. We face next winter with a stronger and more resilient energy system as we have gas storage facilities full above historical level, and we are bringing on stream the first new floating vessel in Piombino in the next few days, which will provide further import flexibility. I now hand over to Luca to command the financial results.
Thanks, Stefano. Good morning, ladies and gentlemen, also on my side. Let's now move to the EBITDA evolution, slide number seven. For the first quarter of 2023, we had EUR 597 million of EBITDA, +1.5% versus last year. The increase is mainly attributable to a EUR 20 million growth in the regulated revenues related to tariff RAB growth for EUR 18 million and higher contribution from flexibility services provided to the system for EUR 12 million, mainly related to the default and storage services. Partially counterbalanced by a negative volume effect due to a milder weather and demand containment measures. A EUR 15 million increase in the energy transition business, mainly attributable to energy efficiency for EUR 14 million, in particular, residential business deep renovation. Biomethane new plants contributed for EUR 2 million.
As a reminder, first quarter 2022 benefited from the one-off contribution from the sale of gas excess inventory with a EUR 33 million EBITDA positive impact, and from the contribution of fees related to a telecom lease contract for about EUR 4 million, which expired at the end of 2022. Moving to slide eight, adjusted net income for the period was EUR 301 million, -7 .4% compared to first quarter 2022, mainly due to higher D&A by EUR 13 million following rising investments. Net financial expenses that increased by EUR 13 million, mainly as a result of higher gross cost of debt, which went from about 0.9% in first quarter 2022 to about 1.5% in first quarter 2023 due to the increase in interest rates.
A lower contribution from associates for about EUR 5 million, that was the result of the reduction of tax, partially offset by DESFA, SeaCorridor, Italian associates contribution. I will provide more details in the following slide. Our portfolio of international associates confirm a solid performance. I'm currently on the following slide. Starting from January, we benefited from the positive contribution of SeaCorridor, about EUR 10 million that entered into the perimeter on January 10th. TAP continued to work in full swing, even if, as known, the short-term volumes exceeding contracted capacity do not increase its contribution. The second step of its expansion, endorsed by the European Commission, is expected by year-end or beginning of next year. Interconnector contribution slightly declined year-on-year by EUR 7 million. Operating performance remained strong, profit cap mechanism kicked in, while last year benefited from the recovery of past year underperformance.
DESFA contributed positive by EUR 11 million, thanks to the higher revenues due to increased LNG imports and export to Bulgaria. The negative contribution from the Austrian TAG, EUR 23 million, is due to expire of long-term contracts are only partially offset by higher reverse flow bookings. Teréga, + EUR 4 million increase was due to the higher booking from Spain and lower energy costs. Turning now to our cash flow on line number 10. Cash flow from operation for the period amounted to EUR 224 million, including EUR 261 million of cash absorption from the working capital evolution. This was driven by - EUR 480 million due to the balance sheet activity, of which about EUR 170 million related to cash deposit decreased due to price reduction, and about - EUR 100 million related to default service receivable increase.
- EUR 180 million of energy efficiency fiscal credits increase driven by eco-bonus revenues. The negative effects were partially counterbalanced by +EUR 290 million temporary effect attributable to additional charges, +EUR 100 million other regulated cash deposit related to storage following the start of the new thermal year. Net investment for the period amounts to EUR 783 million and are mainly related to net CapEx and CapEx payables for EUR 374 million. The cash out of the acquisition of the SeaCorridor for EUR 409 million. Other outflow were related to the payment of the interim dividend for EUR 376 million. Moving to slide 11.
Due to the previously commented cash flow evolution, the change in net debt amounted to about EUR 950 million, resulting in EUR 12.9 billion net debt at the end of 1Q 2023. Average cost of debt moved to 1.5%. The fixed to floating ratio stands at 82%. Sustainable finance on committed financing was stable at 70%, not including the recent funding that was mentioned and closed in April. Considering such funding, it would have moved this ratio to 73%. Funding for the year is essentially completed. In April, we secured more than EUR 2 billion of medium long-term ESG link financing, out of which EUR 1.8 billion RCF obtained by a pool of banks and guaranteed by SACE.
In April, our recent EU taxonomy aligned transition bond has been awarded as Transition Bond of the Year by Environmental Finance as evidence of our continuous efforts in sustainable finance. Given the previously commented working capital evolution and the prefunding already executed, financing needs for 2023 are almost covered, and we expect a net debt evolution in the range of EUR 15 billion-EUR 15.5 billion at the end of 2023, depending clearly on working capital volatility. Finally, in terms of financing costs, based on a current forward curve, we expect the average gross cost of debt to increase to just below 2%. Now let me hand over to Stefano for his closing remarks.
Thank you. Thank you, Luca. We delivered, I think, a solid Q1 results in a volatile environment characterized by weak gas demand, gas prices declining, but above pre-crisis level and rising interest rates. First quarter is on track to achieve 2023 targets that we can confirm, and that are in detail, EUR 2.1 billion of total investments that will be up 10% year-on-year, driven by the CapEx on our gas infrastructure and the acquisition of the second floating vessel, the BW Singapore, that will be located in Ravenna. EUR 22.4 billion tariff RAB, that will be 5% up year-on-year. Net income of around EUR 1.1 billion and dividend per share up by 2.5% versus 2022, in line with our dividend policy.
As was just said, net debt to fall within a range of EUR 15 billion-EUR 15.5 billion, assuming a partial reversal of regulatory working capital. We face 2023 with a much stronger and resilient energy system. We have done sound progress on the delivery of key security of supply projects. Finally, EU and Italian policy support our long-term carbon neutrality path. The REPowerEU funds redirection could support further key security of supply projects while improving affordability. We now are available for your questions. Thank you.
Thank you. This is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as callers join the queue. The first question is from Javier Suarez of Mediobanca. Please go ahead.
Good morning, and many thanks for the presentation. Several questions. The first one is in the portfolio management by the company. We have read on the press a potential several disposal processes in assets that should be close to Snam, such as Edison Stoccaggio, or the possibility of increasing the stake on the Rovigo LNG terminal, et cetera, et cetera. At the same time, there have been recent decisions to rotate asset such as the stake on De Nora. Also you have made a modification in the shareholder agreement or with CDP Reti on Italgas.
The question for you is, can you elaborate for us again on your preferred way of financing new acquisition, on which that could imply for your stake in companies such as De Nora, Italgas, or other stake that you have in your portfolio? That would be the first question. The second question is on the guidance confirmation. I wanted to ask if you are also confirming the recent guidance on the EBITDA at EUR 2.4 billion, including output-based incentive at EUR 100 million and a contribution from energy transition business at EUR 70 million. You can please confirm also that. The third question is on just on your latest statement on debt guidance.
I think that you have mentioned that you use a partial reabsorption of regulatory working capital in 2023. You can be specific on your assumption in regulatory working capital absorption that is behind the debt guidance of EUR 15 billion-EUR 15.5 billion by the year end. Thank you.
Okay. With respect to the opportunities on the M&A you were mentioning, of course, I like to confirm that the company is interested, of course, in understanding how the situation for Edison Stoccaggio will evolve. As I stated several times, we are ready to set with Edison as soon as Edison will decide how to progress in this potential disposal. It works exactly the same for Adriatic LNG. As you know, we are shareholders in the company. We are following the process that the other two shareholders, ExxonMobil and QatarEnergy, just launched. We have agreements with the two shareholders with respect on how and in what circumstances we might round our stake in that asset.
Of course, consistently with what we said at the Capital Market Day, this kind of, let's say, acquisitions will be or can be funded, in total or partly through asset rotation. With respect to the companies you mentioned, I think, our valuation will be not limited to those. I would like to exclude again, the fact that we will consider a disposal of the Italgas stake, whilst in case these two transactions will successfully be concluded, we will see what is gonna be the cash out, and we will measure the eventual options on asset rotation also with respect to the total net financial positions that we want to maintain consistently with the threshold and references we have set and we have with the rating agencies.
With respect to the guidelines on the EBITDA, we can confirm the EUR 2.4, and then I'll turn to Luca for the working capital comments.
Yes. Thanks, Stefano. Yeah, on question number 2, Javier, basically, we confirm the guidance on EBITDA EUR 2.4, which includes output-based incentives, just north of EUR 100 million for this year, for 2023, while we are assuming EUR 100 million basically on average for the rest of the business plan. The energy transition business will contribute around EUR 70 million of EBITDA. Basically, the numbers you were discussing before are fully confirmed.
As far as the evolution of working capital, regular working capital, basically, we expect for our assumption of guidance of EUR 15 billion-EUR 15.5 billion of net debt at the end of the year, an absorption in terms of working capital in the region of basically just north of EUR 2 billion, and that is based on the reabsorption that we mentioned in terms of regular working capital. In particular, balancing items will weight up to a maximum of EUR 800 million, tariff-related items in the region of EUR 400 million, and other working capital items for about EUR 300 million. Clearly, we will have an increase also in the social working capital driven by our stock of energy efficiency eco-bonus credits, which will rise to about EUR 700 million.
Those are basically the main drivers. Clearly, in the net debt guidance, we also include the full payment of the dividend, which is just north of EUR 900 million.
Thanks.
The next question is from Emanuele Oggioni of Kepler. Please go ahead.
Hi, good morning, thank you for taking my question as well. First one is on SoutH2 Corridor. Recently we read that Italy, Germany, Austria, et cetera, signed a letter to put this project under European Union of Common Interest project. It seems that this could be brought forward by a few years compared with your-
Original plan to invest in this in this project after 2030 for EUR 4 billion in only for the Backbone project, and then also EUR 3 billion for the storage capacity. I wonder how these additional CapEx or forward, put forward CapEx, could be financed, and how the impact on how we change the outlook for the company for, I think has improved a lot recently, in the last few months, for for the midterm. Another question is also on the disposal, more clarity on the asset to be disposed. Italgas, you mentioned Italgas is not in the short term among the disposals, but you put this stake among the asset to be sold. Can you recap the priority of your disposals? Thank you.
Thanks, Emanuel. I mean, regarding basically the first question, first of all, when we presented the plan in January, we have assumed that the EUR 4 billion estimated expenditure for the SoutH2 Corridor was partially before 2030 and partially after 2030. Basically, we estimated, you know, the CapEx expenditure starting in the last two years of the decade, and the rest for the transport up until 2032. Those are, you know, currently part of our long-term business plan and potentially be financed with the cash generation that is within the business plan. I.e., the financing of this CapEx plan is sustained by the organic growth of the company. As far as the additional EUR 3 billion for storage, those are where originally planned, you know, towards 2035.
You know, in the first five years of the next decade. Clearly, once we gonna get there, we will see whether, you know, any additional financing measures will be needed in order to basically commit also those CapEx. In terms of the acceleration of this investment, given the support of the three nations that you were mentioning, I mean, nothing has changed in that respect. You know, I think the real news here is that there is a support from the three major countries involved in these projects that make these projects, let me say, more probable to happen, obviously, depending on will be the European policy around transport and storage for hydrogen. Then on the second question, you want to answer.
I can simply reconfirm the clustering we presented at the Capital Market Day. Those, if you remember, were all the associates were clustered in three groups. There was one that included those assets that within could be eligible in case of asset rotation to support M&A. I can simply confirm that with the specification that with respect to Italgas, that is not a matter for the short term, the disposal of the stake, and we also said in several times that that stake can be used or can be, say, can support some financing structures.
Let me just add that we don't have currently any asset disposal plan in our budgeting. Clearly these are, let me say, our reasoning, if asset rotation will be needed in order to support inorganic investment.
Okay. Thank you.
The next question is from Stefano Gamberini of Equita. Please go ahead.
Good morning, everybody. Thanks for taking my three questions. The first, regarding the fact that the regulator defined the general criteria of the, we can say, so-called simplified TotEx from 2024, you underline that the other criteria will arrive in the second part of the year. Could you comment if you expect more benefits or risks from the introduction of this simplified TotEx system from 2024 onwards, and probably, we can say a full TotEx approach from 26 or 28, we will see. The second question regarding the output-based incentives, you underline EUR 100 million, north of EUR 100 million in 2023, and more or less EUR 100 million on the long run. Could you give us a breakdown of this TotEx?
What is the part related to the postponement of, we can say, of, the fact that the assets will remain on stream for a longer period, and when the regulator will approve all this mechanism, if I understood correct, your introduction. The same for the EUR 70 million of non-regulated business. What is the part of efficiency measure that are of these, EUR 70 million, and if you have a projection also for 2024, it would be very welcome. The third is regarding the... Sorry for that. The trend of working capital next year. Do you expect a further absorption of working capital next year, or the level that you reach at the year end will be more or less normalized also for the following years? Many thanks.
I'll start from, you know, basically the more financial questions, Stefano. output-based incentive, you know, in terms of the breakdown, clearly we cannot give a full breakdown of the output-based, but on the asset held, the contribution should be in the range of EUR 40 million to the overall number on a yearly basis. We submitted, you know, basically our proposal to the regulator for this year. We expect for this year, basically their approval at the end of June, so, you know, basically in a couple of months.
When it comes to the breakdown of efficiency or energy transition business to our EBITDA guidance of EUR 2.4 billion for this year, as I said, is in the region of EUR 70 million. The majority of the contribution comes from the energy efficiency businesses, while biomethane will contribute in the region of EUR 10 million of the overall EUR 70 million contribution. On the trend of, you know, working capital absorption, it's very difficult to say what would be the effect for next year because a lot will depend on whether we will have any, let me say, delay in reabsorption this year depending on prices in the last quarter of this year.
To be honest, you know, while we are expecting, let me say, a reabsorption of the positive effect of last year, as I commented before on the different items, very difficult to say whether we will have, let me say, a negative effect next year because it will depend on the prices in the fourth quarter of this year.
With respect to the targets, what I can say is simply the fact that we share the principle of the, of the, let me say, the new methodology that the authority intends to progressively introduce. Of course, we are missing, still missing the details. I mean, the, the mechanism for the regulation of the slow money, fast money, and all the other aspects that relates to this approach. Therefore, what I can say, we don't see any threat or aspect that could jeopardize, let's say, the profitability of the company, and we are supportive and we will still wait to understand how it will be finally defined in the, let's say, details.
Many thanks. I have one question remaining, if I may. Regarding the South Central Hydrogen Corridor, what are the next steps that we can expect before the full approval of this project by EU? What is the financing or the incentive that you expect from EU for this kind of project, if I may? Many thanks.
It's pretty difficult to say. What I can tell you is that discussion at European level with, let's say, the people delegated by the commission to define, firstly, if this project can be eligible and can be considered within the projects of common interest is ongoing. I mean, we have, let's say, I would say, a weekly exchange of information with the team delegated to provide further information about how we think this project should be set up, and also, in, let's say, defining more precisely volumes and projections we expect. That is, let's say, the phase we are in. The following will be, of course, in the hands of Europe that will set up the level of incentives.
Definitely, as for all corridors, about hydrogen, the portion of public support need to be significant in the, especially on the CapEx side. Otherwise, the, let's say, the cost of this infrastructure will be significantly high. I can say that generally speaking, the so-called CEF funding support is generally 50%. Again, with respect the comparison to other corridors, what I can say is that the percentage of repurposed pipes, it's much higher in the case of the South H2 Corridor because it hovers around, we estimate it will hover around 70%, with only 30% of the pipes that need to be built brand new. This number is much, much lower than the ones referred to the other southern corridor or the northern corridor.
Of course, this has an implication on the total CapEx that, as we said, in the case of the SoutH2 Corridor, is almost one-third of what it would be in case of total brand-new construction. On the other side also has a favorable, let's say, impact on the transportation tariffs that becomes more competitive. To be, let's say, straight to your point, I mean, we are just, let's say, in the middle of the process of the, let's say, discussion with the EU guys to understand the eligibility of this project for the projects of common interest and the eligibility on the CEF financing. Also, as I said, with respect to the competition of other projects.
Many thanks.
For any further questions, please press star and one on your telephone. The next question is from Davide Candela of Intesa Sanpaolo. Please go ahead.
Hi there. Good morning, gentlemen, thank you for the presentation. I just have one. I was wondering if you can share your view about gas demand in the medium term, so meaning, I would say, after 2023, 2025. My question is, looking at the new vessels that are coming on stream, so the supply of Italy going up by about 10 BCM, do you expect further infrastructure that will be needed in the second part of this decade in Italy to further diversify the imports if the condition we have seen today remains as stable in future or these new vessel will provide for the supply already there slide for the second part of the decade? Thank you.
With respect to the global demand, global gas demand in Italy and the rest of Europe, what I can say is that this year, our projections, let's say, pose the total demand in line with the full year 2022. We have to say again that this total demand around 68 BCM is the consequence of some in, let's say, permanent efficiency gains, especially in the industry and in the, let's say, domestic consumption. This refers only to 20-25% of the total reduction in consumption from the historical 75 BCM. The reason why is because the majority of the reduction in consumptions was driven by the mild winter we had either in Q4 2022 and Q1 2023, the switch off to other fuel.
If you look at the prices at European level, I mean, you look at the gas prices at 35-37 EUR per megawatt hour, these prices are still higher than, for instance, the LPG or other oil derivatives. Therefore, for some of the industrial sectors, it's still more competitive to use those kind of fuels rather than gas. Also with respect to the thermoelectric generation, we still have the full utilization of coal production. That is taking away more than 2 BCM demand from, let's say, the global demand. I think, the first objective for Italy and Europe is to get rid of coal that is the most impacting in terms of emissions, and that is the demand that will be back for gas.
Therefore, what we do expect is a slight recovery in the years between 25, 26, 27, moving back beyond the 70, 71 BCM, and then seeing the effects of the decarbonization process with the electrification of the consumption and the development of the renewable generation that will bring back the global consumption of Italy in between 60 to 65 BCM by 2030. That is, let's say, the best projection we can make, assuming that the targets in the renewable deployment will be met. Okay. With respect to the infrastructure, I mean, these kind of numbers are not different than the ones that were used to estimate the needs of infrastructure for the country, specifically with respect to the two floating vessel and the new Adriatic backbone.
Of course, these numbers do not take into account the opportunities to export part of the gas in the central part of Europe, mainly those countries that are around Italy, like Austria, Bavaria, Hungary, and Slovakia, that are looking at Italy as one of the potential sources for their needs. In fact, last year, we exported, as you remind, almost 5 BCM of gas that we expected will move, let's say, up, especially in the next decade. Will the two floating vessel be enough, or will we need a further capacity of LNG? Here comes also the strategic choices we intend to pursue.
Of course, with the 10 BCM and this, some spare capacity that will, that is, has been added to OLT and Adriatic LNG, will bring the total capacity of LNG up to 40% of the total demand of the country. We might target the 50% to gain further flexibility. What I can say is that, with the projection we make, the LNG capacity will be fulfilled for more than 70% up to 2030, 2032, and then will hover at more at north of 50% with this capacity. Of course, that is the number that is in line with historical average of utilization of the regas units, nothing different than that.
I think that at the end of the day, adding up to 5 BCM of LNG could be, let's say, another step forward to the further diversification of the sources and the strengthening of the role of Italy as a corridor also for the surrounding countries. Sorry for if I made it too long.
No, that was clear, and thank you for that.
The next question is a follow-up from Emanuele Oggioni of Kepler. Please go ahead.
Thank you. Just a quick follow-up on Adriatic Corridor. The project was recently approved by the Italian regulator, and as you said, it could be eligible for EU funding. If I recall that this project is included for roughly EUR 1 billion, EUR 0.9 billion in your current business plan out of EUR 2.4 billion in total of investment. I wonder how much of the CapEx could be self-financed, and thus will enter in the RAB, and what will be the remaining part not eligible for the RAB due to the EU funding or grants. Thank you.
Thanks, Emmanuele. I mean, it's very difficult to comment on how much, you know, funding could come from the REPowerEU around the Adriatic project. Correctly, you pointed out EUR 900 million in this plan of a total CapEx disbursement of EUR 2.4 billion estimated for the project, of which the majority, again, is beyond 2026, i.e., beyond the plan. Clearly, if we get, gonna get some funding, we might think of accelerating this investment a little bit in terms of timeline, therefore, you know, potentially, you know, allowing us to accelerate.
In terms of the impact that this would have if we get, let me say, grants, REPowerEU grants around this investment, clearly, the remuneration of the contribution of this investment is partial, i.e., we're gonna get 10% amortized over five years, which is what is allowed by the European Commission when you get, basically, public funding for this kind of regulated investment. That's for all kind of investment in regulated business when you get, basically, public funding.
Thank you. Very clear.
The next question is from Bartłomiej Kubicki of Société Générale. Please go ahead.
Hello, good morning. Just two quick things. Firstly, in France, I think there is some discussion right now about the new regulatory period from 2024, which of course will impact your Teréga business. If you can actually share with us your expectations, whether it could have any material impact on the business or not, and what can we expect from the outcome, or what do you expect from the outcome? Secondly, on the strong cost contribution of DESFA. DESFA tends to be relatively volatile, but how much of this improvement do you think is structural, and how much is coming from this sort of seasonal volatility in the first quarter, and what do you think we can expect in terms of DESFA's contribution this year? Thank you.
Yes, thanks, Bartłomiej. I mean, regarding Teréga, basically, yes, there is a revision of the tariff, which suppose will affect the tariff starting from next year. You know, the expectation for us is to basically go down just a little bit, basically shy of 60 basis points vis-a-vis the current, basically remuneration. Again, the visibility on this change will happen towards the fourth quarter of this year. Clearly, we have an assumption of this reduction already embedded in our business plan that we presented in January. In terms of, you know, the contribution of DESFA, I mean, DESFA, as I already mentioned, had a positive contribution in the first quarter vis-a-vis our expectation. We expect this contribution to basically continue to perform towards the end of this year.
You know, going to, into next year, it's very difficult to say. For this year, we're talking about, you know, EUR 45 million in terms of contribution fully in 2023.
If I can add something.
Thanks, Bartłomiej.
To the point. I'm sorry. If I can add something to the point of DESFA, I mean, what is going to be the role of the interconnection with Bulgaria that-
Significantly contributed to the flows. As you know, very soon, January 1st, January next year, we will have the new floating vessel of Alexandroupolis on stream that will provide further flows, partly directed toward Bulgaria. Also, third point that will stabilize going forward the perspectives and the profitability of the company relates to two aspects. First, the 10-year development plan that has been increased significantly under the request of strengthening of the infrastructure due to the new floating and new flows toward north, not only within the country. That is, this 10-year development plan will be significantly higher than the previous one. I wouldn't say double, but 50% more than the former one. Second, we have the discussion ongoing with the Greek regulator also on the return for the regulated activities in the country.
As for Teréga, we expect an outcome by the end of the years. This outcome, of course, will come after the domestic elections that will take place in the forthcoming months. Differently from the situation in France, as far as Greece is concerned, we expect an uprise in the allowed return from transportation infrastructure, and that also will contribute on the stabilization and profitability of the company.
Okay, just a clarification. This new return will apply from 2024 or retrospectively to 2023 as well?
What we expect is a transitory period for 2023 and, the new one applied from 2024.
Thank you, super.
Gentlemen, there are no more questions registered at this time.
Okay. Thank you. Thank you all for participating to this conference and have a good day. Thank you.
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