Good morning. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Snam nine months 2023 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 of Snam. Please go ahead, madam.
Good morning, ladies and gentlemen, and welcome to Snam nine months 2023 consolidated results. Today's presentation will be hosted by our CEO, Stefano Venier, and by our CFO, Luca Passa. In the presentation, Stefano will provide an overview of the results, the key highlights and achievements of the period, and an update of the most recently published outlook on energy market. Luca will walk you through the financial performance, then thank Stefano for closing remarks and finally, the Q&A session. Now let me hand over to Stefano.
Thank you. Thank you, Francesca, and good morning also my... On myself, by myself. I'm on slide two with a few key highlights on the first nine months. Gas demand declined by approximately 14% in the nine months. Gas prices were on average 70% below the first nine months of 2022, that were characterized by consistent volatility, showing the fragility of the energy system. Domestic gas flows continued to be impacted by the geopolitical situation. In front of the declining volumes from the north, these were offset by 20% increase in the LNG import that reached the 12 bcm. On regulatory front, the observation period for the calculation of the weighted average cost of capital parameters ended in September, and the trigger level was reached. We expect between 80 to 90 basis points uplift to kick in from January 24th, 2024.
On October 31st, the regulator published the resolution for the introduction of the Base ROSS from 2024. It provides visibility and continuity with some positives, such as the reduction of the time lag of the allowed D&A from 2025, an update of the deflator, improvements in work in progress revaluation, and the capitalization rates based on historical and prospective average proposed by the companies. All in all, the document is in line with the expectations. We have reached, we have recently published the 2023 scenario update, which is the basis for the new 10-year gas transmission network development plan, and incorporates some of the indications from the draft of the new Italian Integrated National Energy Plan, so-called PNIEC, sent to the European Commission before summer.
It points to a range of 59-68 bcm of natural gas demand by 2030, of which from four to six of biomethane. Carbon capture and storage emerges as a critical decarbonization enabler in the most mitigation pathways. Worth mentioning that Eni has recently reached an agreement with the U.K. government for a first CCS regulated business model for a CCS HyNet North West project, and we are jointly progressing on the Ravenna project. Moving to the results, the nine-month figures are extremely sound. EBITDA adjusted is up by 9%, mainly driven by output-based incentives. Net profit adjusted reached EUR 942 million, up 1% year-on-year, despite rising interest rates and relative cost of debt. Investments are topping EUR 1.1-1.2 billion, were down 6% year-on-year.
The BW Singapore payment will occur in Q4, bringing full-year investment to the guidance of EUR 2.1 billion. Technical investments are up 29% year-on-year, supported by the completion of the first floating vessel in Piombino, and the start of onshore and offshore works, reaching respectively 24% and 7% completion for the second floating vessel in Ravenna. Net debt reached EUR 14.3 billion, as a fact of the already anticipated reversal of regulatory working capital. Looking at our associate portfolio, we successfully placed the first-ever EU Taxonomy-aligned transition bond, exchangeable into existing Italgas ordinary shares. We have proactively leveraged on our stake in Italgas to contain our cost of debt, while keeping voting rights and expected dividend flows. Our interconnection points are performing well, benefiting from their strategic position at the crossroad of the key gas corridors.
Now, moving on to slide three, beyond financial performance, we have made further achievement in terms of security of supply, energy transition, and sustainability. With respect to security of supply, storage facilities are now approximately 99% full, at record level. We have obtained the authorization to run overpressure, also two storage fields, which added further flexibility to the lasting filling phase, with additional 0.2 bcm of gas. For the next infilling season, we could further increase gas volumes in those facility by between 0.4 bcm-0.5 bcm. From November, we have started to provide again the reverse flow service like we did last year. It consists in the availability of daily injection capacity in the next month, associated with the corresponding delivering capacity in the period of January-March 2024, so providing further performance in the peak of the winter season.
The floating Golar Tundra started operation in the beginning of July in Piombino as scheduled. Three LNG carriers have already been discharged, and thermal year 2023-2024 slots are fully booked. We will launch by year-end, the beginning 2024, the capacity auction for a second vessel to be operational in Ravenna by the end of next year. Biomethane sector is ramping up. We have received 300 requests of connections for new plants in the first nine months of 2023, which is 50 more than full year 2022. We are waiting for a possible allocation of REPowerEU funds to some of our projects, starting with the first one- phase one of the Adriatic Pipeline that is already under construction. Now, moving to energy transition. As mentioned, carbon capture is gaining momentum.
The carbon capture project in Ravenna, which I referred before, that is jointly developed with Eni, is on track to start a phase one in 2024. Then the Acorn project in U.K., of which our participant, Storegga, is the lead developer, has obtained a Track-2 status by the U.K. government, and is going to be one of the cluster that will be supported going forward. And Centrica, through one of its subsidiaries, has joined ESB and dCarbonX, which, by the way, is participated by Snam, in the development of the Kestrel project, aiming at the redevelopment of the decommissioned gas reservoir for a large-scale energy storage in Ireland. Greenture, the subsidiary on small-scale activities, starting the construction of the small-scale LNG plant in Pignataro.
It will enter in service in 2025, and will be able to liquefy 50,000 tons of biomethane into bio-LNG for transportation. We have so far been awarded approximately EUR 100 million of plan for resilience and relaunch grants for several projects, such as the H2 Valley, the H2 refilling stations, and the gigafactory we are jointly developing with De Nora. I'm pretty confident that both the Sout H2 Corridor and the CCS project in Ravenna, of which we are partners, could be qualified as project of common interest by the end of the month by the European Commission. We are going to launch in Q1 2024, a market test for the transport of H2 and CO2. Let's now have a look at the progress made in terms of sustainability.
CapEx aligned to EU Taxonomy and SDGs represent respectively 37% and 53% of the total. Methane emissions, which are part of Scope 1 for Snam, are down a remarkable 25% vis-a-vis nine months, 2022. We joined SBTN corporate engagement program as a first step for a certified biodiversity plan. Finally, sustainable finance reached roughly 80% three-year ahead of schedule, and according to a recent shareholder analysis, ESG investors reached 47% of the institutional investors, up from the 43% tracked in January. Now, moving to page four.
With regard to the gas demand context, Italian nine months demand was down 14%, uh, 12%, uh, weather-adjusted, or 7.1 bcm, due to a thermoelectric sector that is down 15.5% year-on-year, or about 4 bcm, driven by electricity demand decline, increase of net imports, mainly from France, by 0.9 bcm, and rise in hydroelectric production by about 1.2 bcm equivalent. Decline in industrial sector, minus 0.8 bcm, is mainly attributable to economic slowdown, with an effect particularly on energy-intensive sector. Worth mentioning that in Q3 2023, the industrial gas demand starting to show a recovery signal with +1% growth.
Civil sector contracted by 2.8 bcm due to the milder winter temperature that corresponds to 1 bcm, demand containment actions, 1.4 bcm, and the increase in energy efficiency. The majority of the decline is therefore not structural. Moving to gas flow, they were impacted by the geopolitical scenario, as I mentioned, with a 48%-58% reduction in volumes from north, compensated by an increase on LNG volumes by 20%, and as I said, lower demand. We exported approximately 2 bcm to Austria and marginally through Switzerland in the first nine months. On the 13th of August, we have reached the physical export level of 40 million cubic meters per day, which is the maximum technical capacity on daily basis. Now, on slide five, we have summarized two recent reports on World Energy Outlook.
What I want to emphasize is that there is an extraordinary high volatility over future energy scenario, as comes out from the two studies, and the energy crisis have somewhat eased, but there is consensus on the fact that the energy market, geopolitical and the global economy are unsettled. The risk of future disruption is therefore possible. If we take the World Energy Outlook, published by IEA, explores different pathways for the global energy system up to 2050, with solar production as assumed as the key technology to enable and accelerate the global, global decarbonization. While focusing on gas from the 2023 global gas report, the key takeaway is that it's important to continue investing in gas infrastructure, to secure reliable and affordable supply, also considering its balancing role for intermittent renewables increase in generation.
We need to accelerate green, low carbon gas and CCS development, considering the key role that molecules will play in the energy mix of the near and longer future. Now, I leave the floor to Luca to comment on the results in more detail. Thank you.
Thanks, Stefano, and good morning, ladies and gentlemen. Let's now move to the nine-month 2023 EBITDA analysis on slide six. EBITDA for the period was EUR 1,862 million, +9.1% versus last year, or EUR +156 million. The increase is mainly attributable to EUR 146 million growth in the regulated revenues related to: regulated revenues growth for a total of about EUR 100 million. These effects were partially counterbalanced by a negative volume effect, due to the already commented lower gas demand and the usual phase out of input-based incentives. The incentives relate to the fully depreciated assets for around EUR 30 million. Higher contribution from storage flexibility services, around EUR 40 million, mainly related to the short-term auctions provided in 2022 and booked in the third quarter, 2023.
Higher contribution from flexibility service on transport, mainly default services, for around EUR 11 million. Furthermore, a EUR 44 million increase in the energy transition businesses, mainly attributable to the energy efficiency and in deep renovation on residential and public administration. With regards to the energy efficiency contribution, we are maximizing the delivery of our backlog on residential businesses. As already seen in the first half of the year, the difference of the items others, is mainly due to the one-off contribution in first quarter 2022, from the sale of gas excess inventory and the expiry at the end of 2022, of the fees related to a TLC ATECO contract, leasing, partially offset by some positive items.
We confirm our full year guidance of EUR 2.4 billion EBITDA, supported by gas infrastructure growth in the last quarter, in line with the nine months, excluding approximately EUR 40 million of the non-repeatable 2022 storage flexibility services. Output-based contribution is estimated at approximately EUR 120 million on the full year. As for the energy transition businesses, nine months 2023 benefited from the full contribution of the Superbonus regime, which will end in December. Therefore, its margin contribution is peaked in the nine months. Moving to slide seven on adjusted net income. Adjusted net income for the period was EUR 942 million, or +1.1% compared to nine months 2022, due to higher D&A by EUR 50 million following rising investments.
Net financial expenses higher by EUR 66 million, mainly as a result of higher gross cost of debt, which moved from 1.1% in nine months, 2022, to approximately 1.9% in nine months, 2022, 2023, due to the increase in interest rates. A slightly lower contribution from associates for EUR 2 million, which was the result of lower international associates contribution by EUR 8 million, driven by the decline of TAG, due to the expiry of most of the long-term contracts and lower volumes due to the Russian-Ukrainian war, partially offset by the contribution of Sea Corridor and sound DESFA results. I will comment in detail in the following slide. A positive contribution of the Italian associates by EUR 6 million, thanks to higher results from Italgas and Adriatic LNG. Higher taxes and minorities.
Tax rate was 24.4%, slightly higher than the months of 2022, and we expect it to be approximately 25% for the full year. As far as full year guidance on adjusted net income, we are fully confident to deliver EUR 1.1 billion guidance, as the last quarter below EBITDA in terms of performance, will be driven by higher linear D&A, higher interest costs, and lower contribution from associates. Moving to international associates, I'm now on the following slide. The contribution to group net income was EUR 180 million, about -4% versus nine months, 2022. Sea Corridor entered into perimeter in January 2023, with a performance in line with budget.
DESFA confirmed the same performance recorded in the first half, supported by auction premia and more remodeling products on LNG and exports, at the connection point with Bulgaria. The annual comparisons also benefited by the pass-through mechanism for energy costs introduced in July 2022. TAP continued to work at full capacity. The increase versus nine months 2022 is largely due to the CPI link tariff. Minimum expansion of +1.2 bcm on year from 2026 is confirmed, and further expansion will depend on market test results at the beginning of 2024. Teréga results is up EUR 8 million year-on-year, thanks to the higher revenues related to storage activities and lower operating costs. Interconnector performance remains in line with last year. Looking at Interconnector, operating performance remains strong, but profit cap mechanism kicked in, while last year benefited from the recovery of past year underperformance.
Capacity is booked at almost 50% until 2027, providing medium long-term visibility. Moving to Austria, the negative contribution from TAG is due to the expiry of long-term contracts in 2022, only partially offset by higher reverse flow booking. Reverse flow is booked for approximately 90%-95% until 2025, and about 50% for 2026. GCA performance benefited from the recovery of the previous year's energy costs. Finally, EMG performance is in line, slightly above, due to the lower D&A, and no impacts on 2022 figures are foreseen due to the outbreak of the conflict in Israel. Turning to our cash flow, slide nine. Cash flow from operation for the period amounted to nine months, due to the working capital absorption for around EUR 1.5 billion.
This was mainly driven by about EUR 800 million absorption, due to the balancing activity, of which about EUR 600 million related to the balancing item receivables. About EUR 500 million related to the cash deposit decrease, due to the gas price reduction. About EUR 400 million related to the full service receivables increase, and were partially compensated by about EUR 700 million positive in settlement items. This is a temporary effect, as it is a payment by the energy system, clearing out through Snam, that then will reimburse to the shippers. And finally, about EUR 400 million negative for the energy efficiency network working capital solution, driven by the fiscal credits related to the Super bonus revenues. As for the full year, we expect working capital absorption of about EUR 2.2 billion, with some uncertainty over the evolution of the balancing activity in the last quarter.
Net investment for the period amounts to EUR 1.439 billion, mainly related to net CapEx and CapEx payables for EUR 1.173 billion. The cash out for the acquisition of Sea Corridor for EUR 410 million, partially offset by the cash in of EUR 144 million for the disposal of the stake in De Nora. Other outflows were related to the payment for the full-year dividends for EUR 933 million, resulting in a change in the debt of about EUR 2.4 billion. Moving to slide 10. Due to the previously commented cash flow evolution, the increase in the debt amounted to EUR 2.4 billion, resulting in 14.3 billion of net debt at the end of third quarter 2023.
The average cost of debt moved to 1.9%, and the fixed to floating ratio stands at 78%. Sustainable finance on committed financing is about 80%, thanks to the recent funding secured close to our long-term target at three years in advance. In September, we issued the first EU Taxonomy online exchangeable transition bonds into Italgas shares for EUR 500 million, which will enable a saving on the cash coupon of about 1% annually versus a plain vanilla bond. Considering the funding executed so far, financing need for 2023 are fully covered, leaving the remaining part of the year for pre-funding activities for 2024. To date, we have already secured EUR 700 million via banking facilities as 2024 pre-funding.
We confirm a net guidance of EUR 15.5 billion at the end of 2023, assuming a working capital absorption of EUR 2.2 billion, mainly driven by balancing activity, which is subject to a degree of uncertainty, as mentioned before, on prices and on cash deposit withdrawal in the last quarter. In terms of financing costs, based on the current forward curve, we expect the average gross cost of debt to increase to approximately 2% for the full year. And now, let me hand over to Stefano for his closing remarks.
Thank you. Thank you, Luca. We delivered what we judge to be sound nine months result in a volatile environment, characterized by still reshaping gas flows, high volatility, high volatile gas prices, and rising interest rates. As stated before, we are fully confident to achieve the 2023 targets. In detail, EUR 2.1 billion of total investments that are up 10% year-on-year, driven by the CapEx in our gas infrastructure and the acquisition of the second floating vessel. EUR 22.4 billion tariff RAB, that is up 5% year-on-year. Net income of EUR 1.1 billion, and dividend per share up by 2.5% versus 2022, in line with our dividend policy.
By the way, yesterday, the board approved the interim dividend of EUR 0.11128 per share, that is still again in line with the policies. And finally, the net debt of EUR 15.5 billion, as Luca just explained. We face the 2023 winter in a better position, but volatility persists that depends on external factors. Gas markets are in a fragile equilibrium, and there is high uncertainty over the future scenarios. For this reason, energy planning and the strengthening of the energy system remains crucial to avoid new supply crises. It's important to continue investing in gas infrastructure to secure reliable and affordable natural gas supply, and accelerate the development of the green, low carbon gas platform and the CCS, which is fully in line with our strategy.
We have made sound progress, as I explained, to deliver the strategic plan growth targets. We are planning to present the updated industrial plan the last week of January in Milan, and invitations will be out in the coming weeks. Now, we turn to you for questions. 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 touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. We ask participants to ask only two questions before turning to the queue. Management will take two participants' questions before answering. Anyone who has a question may press star and one at this time. The first question is from Sarah Lester with Morgan Stanley. Please go ahead.
Thank you. I've just got one high-level question, please, on regulation. So this new ROSS-based regime, the move to the TotEx-like framework, I'm interested in how you see this impacting the sector as a whole in the longer term. You mentioned a couple of positives earlier, but for instance, do you think that spending amounts will be harder to justify under this new regime? And do you think it would result in a more or a less nimble framework? Just generally speaking, I'm wondering if you think this is a net positive for network spending in the space or really no change at all. Thank you.
Hi, Sarah. This is Luca. I mean, on the ROSS introductory regime, as we mentioned, first of all, is in line with expectation. There are, I would say, certain positives. Clearly, the D&A recognition at T- minus one, which is an improvement for transport, and it will start in 2025. Second, you know, the deflator that will be used for the calculation of the revenues related to the first year will be adjusted, taking consideration the inflation of the year 2023, which again, is you know, a positive. The improved remuneration on, you know, work in progress, again.
And as far as, you know, the overall or high-level question, capitalization rates will be calculated as the average of the past two years, and the estimation on the forward three years, which will be basically given by operators to the regulator. So clearly, is a positive in terms of, you know, future spending for regulatory companies overall, and we deem is a positive, I would say, event for the sector going forward.
Thank you.
The next question is from Javier Suarez with Mediobanca. Please go ahead.
Hi, good morning, and thank you for taking my questions. Two questions. The first one is on the general gas outlook. On the slide number four, you are showing significant decreases across the board, but mainly in the residential area and also in the industrial area, which are quite significant. So the question for you is, going into 2024, which are your expectations of, maybe by activities, in terms of gas consumption for next year? And then the second question is on the guidance and what you are including in current guidance. So when you are talking about EUR 2.4 billion of EBITDA, you can help us to understand what are you including in terms of output-based incentive.
I think that in previous conference call, you were mentioning EUR 100 million during third quarter. You have been accounting something like EUR 40 million related to activities provided during 2022. So the new guidance include EUR 140 million, or is a different numbers? And also, I think that you mentioned last conference call, EUR 80 million from energy, the energy efficiency business, if you can confirm that. And also, in terms of net income guidance, you can share with us that EUR 1.1 billion of net income, what is included in terms of contribution from associates? Thank you.
With respect to the general outlook, I can say that, of course, this year is reflecting different events that happened. I mean, the mild winter that affected the first quarter of the year, of course, had a significant impact. Of course, when we made the projections, we referred to, let's say, average temperature over the past periods. So it's extremely difficult to make projections, of course, a projection on what is gonna happen, and anyhow, what we take as a reference is the average of the last 10, 20 years to lay- to, let's make projections. With respect to the industrial sector, I think, here depends on the development of the industrial production we're gonna have, looking forward.
As a matter of fact, in the Q3, we saw some, let's say, rebound on the, on the consumption, as I mentioned, and, and, also, we, we will see progressively, some return on consumption on the energy intensive sectors, that because of the price, high prices and the volatility, they, they worked, on a stop-and-go, on a stop-and-go basis. And therefore, I think with the stabilization of the prices at EUR 0.40-EUR 0.45 per cubic meter, we will see some of those consumption coming back. The third is, is the thermal generation. We have to consider three major aspects, we have had this year. The first one, in the first part of the year, we had the, the coal production that was, under a full capacity regime, that now this is, this is over.
The extreme significance of the rainfalls that happened during summer and this month, that increased remarkably the hydro production and the strong contribution that came from France because of the spreading prices. Also, these kind of events should, let's say, stabilized going forward. Therefore, I think we expect to see a consumption for 2024 in a region of, let's say, 65-67 bcm, just with a slight recovery of the gap that we have seen in this year because of the reason I mentioned.
Looking forward, the different scenarios, as I said during my presentation, see that by 2030, consumption in between, let's say, 58 bcm and 63-64 bcm, depending on the speed of development of the renewables we're gonna have in the country. Of course, these numbers, with respect to the total volume shipped in our pipelines, do not take into consideration the export volumes. That, of course, goes on top of the consumption, and we expect we'll have some benefit, primarily, with the put on stream of the Ravenna facility that is exactly in the corridor toward Austria and southern part of Germany. So that's, I think, going forward, we will see an increase on the volumes on export side that will be shipped in the pipeline system.
Luca?
As far as assumptions, you know, for the full year guidance, at EBITDA level, you asked about the output base, and we are basically estimating a contribution of EUR 120 million approximately for the full year, which includes also the EUR 40 million, basically non-recurring, that we booked in the third quarter this year on flexibility. As far as the energy transition, as I mentioned in the call, you know, the contribution has peaked for the deep renovation, both residential public administration, mainly because of, you know, basically the end of the super bond cycles by December of this year.
We actually confirmed a guidance of EUR 70 million contribution in the last conference call, which we confirm here, basically depending on, you know, how this ending of the Super bonus period will basically perform by the end of this year, but that is confirmed. And then going, you know, below EBITDA for the 1.5-1 billion guidance, you have basically two effects. As I said, interest cost is increasing to 2% on average for the full year, so we will have a higher interest basically payment, you know, towards the fourth quarter for a higher average overall debt for the full year.
In terms of associates, you know, the contribution, we expect just below EUR 300 million overall for the full portfolio, which for the international, is just above EUR 200 million in terms of contribution for the full year.
Thank you.
The next question is from Jose Ruiz with Barclays. Please go ahead.
Yeah, good morning. Thanks for taking my questions. The first one is, if you can confirm that your M&A activity is in standstill, if anything has changed? The second question is, you have increased the average cost debt guidance for 2023, and I guess this is related to refinancing at a higher cost. Can you kind of set up a path of increase into 2024? Thank you very much.
Hi. With respect to the M&A, we are not in standstill, frankly speaking. I mean, there are some, let's say, possible opportunities that are going on. Let me list them first. As you know, Exxon and QatarEnergy are negotiating with, let's say, BlackRock, the acquisition of a stake on Adriatic LNG. That is the LNG facility offshore the North Adriatic, and we have a preemption right, or we have the right to increase our stake that is presently at 7.3. That kind of negotiation is not ended yet, so we don't know the final terms and conditions that will be agreed by the three parties.
When those will be available and notified to us, we will evaluate whether or not to increase that stake, of course, further strengthening the presence of the company in the LNG facility and the LNG capacity. The second, that is well known, is Edison Stoccaggio. The Edison Group and EDF Group started the sounding of the market just a month ago, and we expect, as other players, we expect to submit a non-binding offer by beginning December. That means that, after that first phase, we will see if there will be ground to go forward. But as I said, in other, let's say, situations, this is an asset of our interest. Of course, it's gonna be an opportunity, depending on the price that will come up.
These are the two major, let's say, titles I'd like to mention. We are not in a standstill. We are looking around, of course, we have, for the time being, a major focus on the investments, but asset rotation or strengthening of the asset on strategic areas is still, let's say, at the top of the attention of the management. Then as far as average cost of debt, Jose, we have not, you know, changed our guidance for this full year, which was, has always been, you know, 2% average, you know, cost for the full year, which we confirm, you know, by the end of the year. We're currently at 1.9%, and we will finish at 2% by the end of the year.
Now, in terms of, you know, evolution in the following years, clearly, we will have, you know, a more, I would say, ground discussion when we will present the plan in January, but interest rates are higher, the scenario is higher, so you could point to an average cost of debt, for 2024, which is closer to 2.5%, which is clearly higher than what we expect, in the current approved plan and presented, last January.
Thank you. Very clear.
The next question is from Meike Becker with HSBC. Please go ahead.
Yes, thank you very much for taking my questions. I have two on the progress of your business ranges, the more, the newer ones, so to speak. On the energy transition and specifically the energy efficiency, how confident do you feel about your 2024-2026 outlook? I mean, on the energy efficiency, 2023 seems to have gone very well, so I'm just wondering what your outlook is for that business, specifically longer term. The second question is, some of your peers have made comments that maybe their expectations for hydrogen project development might be going slower than expected.
So it would be great to hear how your CCS and hydrogen projects are progressing, and if you're sort of like, how your expectations have changed over the last, over the year, if they have changed at all. That would be great. Thank you.
With respect to the energy efficiency, as you said, I mean, 2023 performed very well. Of course, the, let's say, change in the incentive schemes related to the Super-E co bonus, as is, is used to call, was expected. Also, when we set up the business plan, the, the, the current business plan. Therefore, if we look at the new projections that we are working on for, as I said, the new business plan will be presented in January, there are no major news that come that, let's say, changes the expectations and projections. Of course, as Luca said, the Super-E co bonus created a sort of peak, in 2022, and specifically in 2023.
This is gonna be over in 2024, but we have strong fundamentals, especially on the industrial business and the public sector, we can leverage upon with a very long-term backlog of contracts that will provide and will underpin the projections we already presented with the existing business plan. So we are not seeing, in the discussion we are having with the management, major changes in the period between 2024, 2026, 2027. With respect to H2 development, yes, it's true. I mean, some of the projects are taking some delay, but as a matter of fact, we are not linked much to single project.
We are working on the infrastructure, and, as we always said, this, let's say, repurposing of the infrastructure, will start and happen, from the second part of the decade and, the first part of 2020, 2030. And this is the period when we will see exactly how the progress will come. We have to say that, to that extent, we also have, one, let's say, angle of flexibility that is related to the fact that we can develop this kind, this Sout H2 Corridor, end-to-end through the pipe, but also having several, let's say, ports, that can receive some of the green molecules along the way, that could make or provide an optimization in development.
I think that one step, important step, will happen very soon with the final, the conclusion of the process of the PCI. This will open the window to, let's say, a request for the full support. And, on the other side, I have to say that discussions, with the, let's say, German, Austrian and Italian companies to, let's say, create a sort of, projections between balance, between demand and, and production on long-term basis is progressing. We had the meeting, large meeting in January, a month ago. Next one is gonna be in Vienna, beginning of January, and the next one in Rome.
So things are progressing, not as fast as originally figure out, but I have to say that the commitment, especially from the large consumer auto-based industry, is strong, and will be confirmed as far as Italy is concerned by a sounding, a survey we're gonna take on Q1, 2024. That will involve not only the potential hydrogen demand, but also demand for CO2 capture. So the two solutions probably will come in, let's say, complementary way for the auto-based industry.
Just on the first question, just to give you some numbers underlying, we're gonna finish the year on the energy efficiency with a backlog of EUR 1.3 billion, which has a duration of 11 years. So as Stefano pointed out, clearly, some slowdown due to the end of the Super-E co bonus, but you know, enough visibility for the following years.
Thank you. Very helpful.
The next question is from Stefano Gamberini with Equita SIM . Please go ahead.
Good morning, everybody. I have two questions. The first regarding the situation in the current scenario of higher interest rate, could you still finance the strong acceleration of CapEx you have in the forthcoming years? Or, I don't know, are you working on some measures in order to sustain your capital structure, like, for example, what you issued as convertible bond? Could we expect something in the long run? And if you can confirm that the dividend policy will be anyway confirmed. What I'm interested in is to understand what is your financial flexibility for all these projects that you are mentioning, like, CCS, that could arrive in forthcoming years. Then the second, regarding the, your comment about the Base ROSS regulation on the, deflator.
If I'm not wrong, in 2024, you should use, you should apply, the fleet of gross fixed investment of 2022, which was around 4%. But if you now move with the new regulation, applying the 2023 expected RAB deflator, gross fixed investment, this was just in the region of 1% in the first quarter, in second quarter, 2023. So you see the risk of lower RAB deflator for 2024, due to the introduction of the new ROS. Many thanks.
But you spend them on adjustment, no? Okay, yeah, I'll take the second, and I'll leave the first for Luca. The matter of the deflator need to be treated very carefully, because, I mean, the setup, the year zero or year one, as you wanna call it, that is 2024, will have to consider also the readjustment on the deflator that happened with respect to 2021 and 2022, that in total was 1.5%. Okay? And this, we expect, is gonna be part of the, let's say, definition of the deflator to be adjusted for 2024. So that will, to our extent, offset partly the risk that you were mentioning.
As far as, you know, basically the higher interest rate scenario, clearly, yes, it's higher than our assumption in the business plan, but, you know, this higher interest rate scenario also will affect, you know, basically the remuneration through tariffs. So I think we have, you know, a more balanced actually approach, you know, going forward. We don't have any risk in terms of, you know, refinancing. We're talking about between EUR 2 billion and EUR 3 billion of refinancing per year, which includes existing refinancing plus, you know, financing of the new CapEx, which is something, very feasible, basically for our credit rating in the current market.
Clearly, if we have the flexibility to use instruments like we used for the recent exchangeable bond, we will, you know, do so. And in terms of financial flexibility, we still maintain financial flexibility because we are, you know, well below the 70% threshold from the rating agencies. If you, if you want to quantify that, you know, we're talking in terms of financial flexibility, more than EUR 1 billion in terms of financial flexibility. That doesn't mean we would like, you know, to basically fill, i.e., we want to maintain this flexibility. Therefore, our approach, you know, to non-organic, will be also driven by this, these metrics.
Bear in mind that, you know, the two deals that, you know, Stefano mentioned before, are, you know, for the second one, clearly regulated and a lever type of, you know, transaction. So clearly will contribute, to RAB, if successful. And for the first one, is, an equity, ticket, which is very minor, given, you know, the size of our balance sheet.
Thank you.
The next question is from Piotr Dzieciolowski with Citibank. Please go ahead.
Hi, good morning, everybody. I have two questions. So the first one, I wanted to ask you about, you know, I was listening to the calls of one other pipe operator, and they mentioned that essentially, they've seen a big decrease of the cost of a compressor stations because of the cost of gas purchases, and that fed into their financials. So I just wanted to ask you, how is that accounted on your side? You know, whether you benefit of it or that's a full pass-through element on your financials. And the second element, second question, I wanted to ask you about the TAG, which is now not utilized in Austria. So is there any update on your discussion with the regulator, how the issue could be resolved? Thank you.
As far as the TAG is concerned, I mean, we have this discussion ongoing with the regulator. I think we will have some outcome, official outcome beginning next year. So I hope to give you some, let's say, more detailed results during the presentation of the business plan. So the only thing I can say, those discussion are progressing and are progressing in the direction we were, let's say, hoping for. That means find a way to sterilize the volatility of the results linked to the volume shift, and switch to a more strategic perspective that takes into account not only the role as a vehicle for the gas security of supply, but also the hydrogen opportunities.
The second, regarding the cost of compression stations, those being technical investments on the infrastructure goes into the RAB and are fully covered by, let's say, the return on RAB, on the regulatory framework. I have to say that the increase in cost for the compression station has not been so remarkable as probably you were referring to, as a matter of fact-
No, I was saying... apologies.
Sorry.
I was asking more about the cost of shipping the gas, you know, the operating of it, or like, OpEx cost of the gas you have to burn for the compression station-
Ah, sorry, sorry.
to put the gas around.
Okay. That is a pass-through cost.
Okay, I understand.
The next question is from Davide Candela with Intesa Sanpaolo. Please go ahead.
Hi, good morning, and thank you for the presentation and taking my question. I actually have just one, and I was wondering if you can comment a bit on the draft of the energy decree that was that is under discussion to the Italian government. The draft was mentioning about the new regasification facilities to be built in Italy in order to ensure security supply. I am aware that you may comment this and the final outcome will be out and maybe in the plan, but just to know if your formal plan, your current plan was envisioning those investments relating to potential new regasification facilities.
And if these facilities should be built in the next few years, this would imply an additional strengthening of the infrastructure in south of Italy for you. So, you know, at the end, part of the investment on gas infrastructure. Thank you.
The two facilities you are referring to, of course, are developed by two, let's say, private players. As I mentioned, and as part of the strategic infrastructure to, let's say, strengthen the Italian system, there is the Adriatic backbone. The Adriatic backbone will be built by 2028. Phase one will be ready by the end of 2026 to be, let's say, compliant with the REPowerEU and the substantial proceeds from EU Commission. And the second phase will be by the end of 2027. So to have this 10 billion cubic meters of additional capacity available from 2028.
This is the additional capacity, transportation capacity, south to north, that we will offer to the market, and that will be fulfilled, potentially fulfilled by these new units. Of course, additional capacity can come in case there is a reduction in flows from the current sources. That means primarily Algeria. Otherwise, new additional transport capacity will be required with the consequent time for authorization and construction. There is another number I like to, let's say, recall, is the fact that with this 10 bcm of additional capacity, total transport transportation capacity south to north will increase up to 55 billion cubic meters. Okay? That has to be added to the 28 billion cubic meters of the LNG capacity that will be available on the northern part of Italy through the LNG infrastructure.
That makes the total input capacity for the country.
Many thanks.
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So thank you for, to everyone for participating in this call, and, I'll see you soon.
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