Good afternoon, ladies and gentlemen, and welcome to 2022/2028 Italgas' Strategy Presentation. Welcome to the ones who are here in Largo Regio Parco in Turin at Italgas' renovated headquarters, and to the ones who are connected to us via remote. I'm Francesca Gambarini, and I'm very pleased to be with you. Today is a very important day since we are presenting the new strategy of the longest running company in the distribution of gas in Italy. If you think about it, when Italgas was born, it was 1837. Italy still didn't exist. It was a long time ago indeed, but I am pretty sure you always know everything about the story of this company. By the way, we are not here to talk about the past, but to talk about the future, the future of energy, of clean energies and the future of. The transformation of our energy system in a more sustainable, affordable, smart and secure one. If you look at the title of our event, in fact, you will find two extremely significant words, Revolution and Evolution. You can read it together since the story we are telling you today is a story of evolution and revolution at the same time. These two words define, in fact, the context and the strategy in which a company such as Italgas is moving in order to reshape and recrafting the new energy infrastructure Europe needs now. Recrafting will be another key word for us today, and I find it, really precise to describe Italgas engagement, and we'll see how. Going straight to the point, if the pandemic of COVID-19 had made it clear that we had to take more impactful, bigger, bolder steps towards a more sustainable way of producing and consuming energy, then we must say we took them. We triggered the change. Well, now the so-called big picture changed again and forced us to move faster and in a slightly different direction. We all know that the new geopolitical and energy market realities nowadays require us to drastically accelerate our clean energy transition and increase also Europe's energy independence from unreliable suppliers and fossil fuels. Well, in this scenario, companies such as Italgas can play a crucial role by enabling the green and sustainable transition with the smart evolution of network and never ending innovation towards digitalization, of course, and the focus on renewable gases and energies. Well, this is just a short preview of what we are going to listen. Without any further ado, let me introduce our first guest, Italgas Chairwoman Benedetta Navarra, if you want to join us on stage. Good afternoon, everyone. It's a pleasure for me to be here for the presentation of the Italgas 2022/2028 strategic plan. I would like, first of all, to welcome to our renewed premises here in Turin, those who are here in person, analysts and investors, and also the journalists in the press room. Also thanks those who are attending in the press room and online. I'm glad that this event can once finally be held in person after two years in which the pandemic has reduced the opportunity to meet. I'm glad, in any case, I have to underline that as we have been able to overcome, we hope finally, the health situation, the health crisis. We are now facing new challenges due to the new geopolitical developments. Over the past three months, the outbreak of the conflict in Ukraine has challenged many of our certainties and led the European Union to introduce measures to reduce and even to eliminate member state energy dependence on Russia. In this context, the contribution of each of us on building a sustainable future and achieving the goals set by the European Union is as crucial as ever. Italgas, as you know, is an historic company founded about two centuries ago here in Turin, and has always been a key player in the industrial Italian environment. Not only, Italgas is a company capable of boosting the development of our country, also in periods of great economic uncertainties. In recent years, the group growth journey has been, as you know, continuous. A sign of deep solidity and a concrete commitment that is reflected in daily action, aimed on creating value for the territories and community in which we operate. It's with this in mind that today we present our strategic plan, whose main purpose is to enable Italgas to continue to grow sustainably, play a leading role in Italy and in Europe, and moreover, lead the energy transition. I would like to conclude by expressing my deep gratitude. To all those who have worked and are working daily to achieve these important objectives. Thank you, thank you, and thanks again. Thank you, Chairwoman Navarra. Thank you for your introduction of our day. Let's go straight to the core of our event. I can see my next guests are ready to join me on stage. Please welcome Paolo Gallo, CEO of Italgas, and Gianfranco Amoroso, CFO of Italgas. Welcome. Paolo Gallo, let me start out with a question for you. We are in a time of big changes. Yeah. We already said it, but maybe we should repeat it, and we will repeat it along our day. Further shock on commodity markets, then the Russia-Ukraine war that was just underlined by President Navarra, and many established paradigms on which EU energy policies were based are under question or maybe under attack, we can say. Carbon neutrality, of course, is still our long-term objective, our long-term goal, but the REPowerEU has overtaken the previous Fit for 55. Right. I'm sorry. Now, the REPowerEU is, you know, leading the path to strengthen the resilience of EU energy system. In this context, how Italgas is moving and with what perspectives? Okay. Before getting into the details of the answer, let me just try to recall what the journey that the European Union started quite long time ago. I'm not going back to the Kyoto Protocol that probably some of you may recall, but just starting from 2015, from the Paris COP 21, that has been the first step identifying a number of action to reduce the CO2 emission. More recently, the Glasgow COP26 was able to enhance those objective, as you can see on the graph, bringing down the perspective of CO2 emission on the long run. As you can see, there's still an ambition gap. There's still a gap that has to be closed if we want to reach by 2050 the net zero emission. When we had the war in Ukraine, the conflict brought by Russia in Ukraine, somebody thought about, "Well, we need to forget the energy transition. We need to focus on the security of supply and forget about fossil fuel, in a sense, to renounce the fossil fuel. We need to have the energy." The extremely positive work done by the European Commission is based on the Fit for 55 that you mentioned before, was able to reshape the objective, and they were able in a few days, few weeks maybe, just to issue the REPowerEU. The REPowerEU, on the contrary, will accelerate the energy transition, will not slow down the energy transition. I will tell you in a moment why. From a very, let me say, tragic situation like what is happening right now in Ukraine, we were able, the European Union were able to shape again the future of the European Union to reduce more, even more quickly the dependence from the fossil fuel being one of the dependence from Russia, the first one. Let me just give you a picture, which is the percentage of the gas in the mix in Europe, in Italy, in Greece. Also to show you that we have been talking, and I remember since the beginning of the century, 2000, we've been talking about security of supply many times. The reality that we see now is that the dependence on Russia has been either steady or has been increasing since the years. Today, more than ever, the security of supply has become core in the energy policy. It is evident that the REPowerEU is trying to bring back the security of supply at the center of the discussion and find a solution. As probably all of you know, there is no one single solution that can solve the Russian problem. There are multiple levers. You can see the long list. I don't want to go through all of them. I want to just point it out which are the most important and are most relevant for our strategic plan. When I was saying the REPowerEU will accelerate the energy transition, is because 50% of the Russian gas will be replaced by renewable gases. 50% is 50% of 155 cubic meters, so huge amount of gas. One-fourth will be replaced by biomethane. Biomethane will be produced locally in, hopefully in the European Union. If you look at the numbers of the REPowerEU in respect to the Fit for 55, the production, the objective production has been doubled. Even more is the hydrogen. Hydrogen has become four times the initial numbers in the Fit for 55. 20 million tons either imported or locally produced. The third lever that is very important for in our strategic plan is the energy efficiency. We don't have such a big increase, so we move from 9% to 13%. But still it's extremely important if we want to reach the full independence from natural gas coming from Russia. Then there are many others that you can read. I wanted to focus you on these three elements, because these three elements are the most important one also for our strategic plan. Paolo, tell me if I understand well. There's no way we come out of this crisis without biomethane, without hydrogen, without clean energies. We have very ambitious targets, but where are we now? What is the real potential? Well, you know, we have been talking in the last couple of years a lot about hydrogen, a lot about biomethane. Let me say that the potential of these two, especially the second one, the biomethane, is probably huge. It is probably bigger than anyone can think about. I will try to give you some numbers to give you the idea. If you look at those numbers, you can see that since 2020, the number of plants connected to the grid has been significantly increased in terms of numbers. We also need to talk about biogas, and I will explain why in a moment it's so important in this picture, biogas. Someone may say, which is the difference between biogas and biomethane? I will explain in a moment. Let's focus on biomethane. Why biomethane is so important? First of all, it support the circular economy. Everybody are talking about circular economy, but that's a reality. I mean, think about agricultural waste. Agricultural waste is a problem for the agriculture. Agricultural waste in case of the biomethane, it becomes an opportunity. It's CO2 neutral because waste have been already produced CO2, so will not add any CO2. On the contrary, it may become CO2 negative if it, on the biomethane production, there is also the technology of the carbon capture system applied. It has high combustion quality because biomethane is one of the most pure natural gas that you can find, and there is no technology issue. Technology is there. It's been there for many, many years, so there is no technology issue like we may have on the hydrogen side. Let me show the difference between biogas and biomethane because just to give you two numbers for you to keep in mind. Generally speaking, one biomethane plant produce between 5-10 million cubic meters of biomethane per year. So 1 billion cubic meters of biomethane needs around 100-150 plants. So if you multiply by 10 billion, then you move to 1,000. So we need thousands and thousands of plants spread all over Europe to produce biomethane. From the waste aside, there is no problem. I mean, unfortunately or fortunately, we produce tons of waste, so let me say the raw material is available. This is the situation in Italy today. We produce significant amount of biogas. Biogas is the first step of moving toward biomethane. Biogas need to be purified to become biomethane. As of today, there is production of biogas in the range of around a little bit more than 2 billion cubic meters. The biogas is a waste, let me say. Let me use these two words. Why? Because biogas is normally burned in a very inefficient power plant, so they produce electricity with a conversion rate very, very inefficient. The first step would have been just to upgrade the existing plant of biogas and moving into biomethane. Out of the 2 billion, you can probably have a little bit more than 1 billion cubic meter of biomethane immediately. Then there are agricultural waste that are the result of the water treatment that needs to be treated, not as a waste, but they can produce biomethane. The potential in Italy is huge. We have estimated that by 2030, so by the same time of the objective set by the European Commission, we can achieve a production of nearly 8 billion cubic meters that represent more than 10% of our local demand. Can you imagine that between now and 2030, 10% of our demand can be even more, can be supplied by biomethane that has CO2 emission equal to zero? It's extremely important. The biomethane is there. The problem are two, let me say. The first one is to have regulatory incentive scheme stable, clear. Then the second problem is even more bigger, that is to get the permitting, because we need to have 1,500 biomethane plant in place to produce that amount. The situation on hydrogen is slightly different. Even though Europe is at the forefront in projects around hydrogen, you can see you can go from repurposing of the existing infrastructure, green hydrogen production, storage. There are multiple dozen of projects that are relevant to hydrogen, to the different aspects of the value chain of hydrogen. I think that all those investments will soon be able to arrive to the point where the production of the green hydrogen will be competitive toward natural gas or other in terms of euro per energy produced. For example, we recently participated to a study that was carried out by an association called Ready4H2. There's a study indeed, which is the status, the current status of the gas network in Europe, and particularly their availability to accept even pure hydrogen. The result has been amazing. It's been amazing. Why? Because. Well, we knew that in advance, but many others didn't know about that the infrastructure are really. I'm not saying I'm completely ready, but with a limited effort we'll become ready to accept even pure hydrogen. Those are the numbers all around Europe. In Italy, we are probably. I would say we are probably. If I take out the probably, we are the most advanced DSO in terms of accepting new gases into our network. Let me just finish recalling the strategy of Italgas, not of today, but all the strategy that we have presented in the past year since the demerging from Snam. If you go back to our presentation in the past year, you will find strategy that today looks like, well, we have been visionary. We have been visionary, honestly. Because when we were talking about improving our network to be able to accommodate different kind of gases, and we did it many years ago, we are fully aligned with the REPowerEU. When we said we should enter into energy efficiency activity because we feel that's the most effective way to reduce final energy consumption, we started back in 2018. When we say we want to expand our activity in different area, either country or like Sardinia, to bring our new concept of the gas network, again, we are fully aligned with the REPowerEU. Today, our strategy, there is nothing new in respect to what we said in past years, but our strategy is extremely aligned with what the European Commission has recently said. Aligned to the challenges of our times. We are talking about a company that has innovation in its DNA since the beginning. I'm not surprised. A lot of opportunities to be taken. Many things are reality, others are just yet to come. In this big picture, in this scenario, the acceleration is strong, very strong towards decarbonization. I was thinking, isn't there a risk that your core business, so the distribution of gas, the gas networks, will be pretty soon stranded assets? No, that has been a question that some of the analysts have raised to me in the past probably five years. I mean, the quick answer is a traditional gas network will soon be stranded, but we are not talking about the traditional gas network. We are talk about the future of the network, the network of tomorrow. Before going into detail, what does it mean that? Let me say one. Let me go back one moment. Because there is a I call it a tale that everybody are telling around, very nice, very easy to buy, very cool, that says. Well, sooner or later we will abandon the fossil fuel, and that is sure, and we will have just renewable sources, and everything will be electric. I always raise the question, okay, let's take this as a true scenario. In the moment when you get into the details and you discuss the details, then you understand that is not realistic. Why? In an electricity system, the electricity system is a continuous balance between demand and offer. If any single moment the demand of energy should be matched by an offer of energy. Today, this stability is provided by the traditional fossil fuel power plant running on natural gas today, but yesterday they were running on oil or coal, are providing the necessary flexibility to adapt the production of energy to the real demand. In other terms, you don't change the demand. You don't say, "Today, I'm not going to use my personal computer because there is no sun outside." That's impossible. You adapt the production of energy. In the moment in which renewable will be 100%, the flexibility is over. There's no more flexibility. You produce energy if there is the sun or the wind is blowing. Otherwise, you don't produce energy. How you can do that? Somebody is answering, "Well, we can use the battery." There are at least three major questions around the batteries. The first one is, how many batteries should I have in order to balance an electrical system like the Italian one? 20,000 megawatts of batteries in terms of power. I think we will never do it. The second point is to build such size, where you get all materials? Finally, the third point is, in the moment in which you have the batteries, then the battery does not have an infinite life, so there is the recycle point of view. The battery is not a solution. Battery is perfect for residential use. Residential use, at the end of the day, relies on the grid. How do you respond to the need of flexibility, how do you respond to the question, the storage? Our grandfather or great-grandfather, when the electrical system was based mainly on the hydropower plant, they built the storage in the water, the pumping station. The pumping station, it's a hydropower plant that pumps the water from the lower basin to the higher basin by using the energy. In that case, they're storing the energy in the water. When you need energy, you leave the water going down again. Unfortunately, all the possibility to create pumping station has been completely exploited, so there is no more possibility. On top of that, the environmental issue is not limited. I mean, it's not minor because you move maybe a couple of meters the water from the lower basin to the higher basin with the effect on the animals, on the plants, and so forth. Of course. There is the other solution is to use the excess of renewable power producing green hydrogen, and store the energy into the hydrogen. The hydrogen is an incredible vector of energy that can be used in mobility, that can be used in industry, that can be used in residential, that can be recombined with CO2 making synthetic natural gas. The flexibility, you will give that, the flexibility to the system if the surplus of power coming from renewable is used to produce green hydrogen. With the green hydrogen, you can even use the traditional power plant that today are running on natural gas. Tomorrow, they can run with very little modification with hydrogen. To do that, and I'm getting to your response, you need one crucial thing. You need to have gas infrastructure that are able to handle different kind of gas. That is the network of tomorrow. That is a picture that we show, that we have been showing several times, that show what does it mean, the network of tomorrow. Network of tomorrow should be digital, smart, and flexible. Digital. Digital means that any equipment that is on the network should be able to read data, to get data, pressure, temperature, flow, external, other elements like external temperature, CO2, whatever. They have to be able to read the environment. When I say any equipment, so not only the smart meters, everything should be digital. Why? Because when all the digital equipment are providing data to our control center, for example, that is we know exactly what is happening to the network. If you know exactly what's happening to a network, then you are smart because you can react on a real-time basis of any different condition that may happen. You can react remotely, so you can send instruction to the digital equipment, or eventually, you can even put on board intelligence that is able to use the data collected locally and react locally. The last element, flexible. You remember that I told you how many thousand of biomethane plant, how many thousand of green hydrogen production plant will be installed, hopefully. Well, today, we have a limited number of what we call city gate, so the injection point or the point of connection between transportation and distribution. Tomorrow, we will have a distributed production of gas. What does it mean? Well, it means that you have different point of injection, and probably, most probably, they are located in a rural area where the local consumption is not enough to absorb all the local production. What you need to do, we need to be able to have a network that is able to change the direction of the flow. Instead of going from the city gate to the end customer, you can move from nearby the end customer and go back to the transportation network in order to let, not to limit the production of biomethane. Those are the three characteristic of the network of tomorrow. To do that, you need to invest. We are already invested quite a lot. We still have a journey to be completed. As you can see, the asset is not only the smart meters. Gianfranco will tell us later about our plan for the future smart meter. We are starting the future smart meter today, the new, 2.0, 4.0, 5.0. I don't know what the number we will give. It's a new smart meter that will embed a number of feature that today the smart meter does not have, such as cybersecurity, against earthquake, a longer battery life. We are developing a prototype that will soon be available to handle, for example, different kind of gases. Be able to measure which is the gases that is provided, that is supplied to the end customer. That is the smart meter. We are replacing city gate. We are upgrading city gate. We are replacing the pressure reduction station to make it digital. I mean, all equipment, the valves, everything should be digital. Collect data, looking at the data, use the data to change the way that we manage the network, and be ready to accommodate different kind of gases. To do that, we need to foster this transformation through innovation. Why? Because we are at the forefront of the technology, so we don't find, let me say, this equipment ready on the shelf to be taken and installed. Sometimes we need to partner with some of our suppliers to develop the prototype, to test the prototype, and then to install the prototype itself. That is what we are doing in our internal research and development activity. As I mentioned to you already, the smart meter, but also other equipment. We have been partnering with some of our suppliers and develop new products. That is not enough because the innovation comes from everywhere. We are doing a couple of times per year what is called calls for innovation, calls for ideas, calls for startups, in the area where the innovation is probably more spread than ever, like U.S., Canada, Israel, Europe, U.K. That's the way in which we get ideas that can be applied into our day-by-day activities. Finally, we are also investing, let me say, not as a venture capitalist, but in a venture capital activity. The reason is because we want somebody else to manage the venture capital, because it's a different way. It's not our business. For us, it's an opportunity to get in touch with startups that may bring us other ideas. That is the way in which we are trying to expand our activity on the innovation. I want to show you, and some of you has been or has already seen it, the first result of our innovation. It's called DANA. It's called Digital Advanced Network Automation that is unique in the world. Why is it unique? Because it's getting all the data from the network. As of today, it's limited to a portion of the network, but every day, we are expanding that. It's unique because it is based here in Torino. They collecting data, but they not only collecting data, but they can remotely control the network and intervene in case there is a need. It's the, let me say, the major benefits are the ability to monitor the distribution system and to intervene when it is needed. It's incredible because in our industry, it does not exist. We are the first company in the world that are being implemented. For the time being, well, you need, first of all, to have a truly digital network, otherwise you won't be able to do it. We have small portion of the grid for the time being under the DANA. We are adding every day new portion of the grid. Hopefully, by the end of next year, we'll be able to have our 75,000 km of grid under these new incredible tools that will help us to monitor today's activity, in the future, to monitor different kind of gases flowing into our network. If we talk about biomethane, what we are doing on the biomethane, because it's another element. We said before that the biomethane we represent in Italy more than 10%. We should be ready to accept that biomethane. We have already received many requests of connection. We are working on it. What is our aim? The first one is to reduce the connection cost. We are working on that. Why it's important? Because today, 80% of the cost will be sustained by the biomethane producer, only 20% by the system. To me, that's the first element that has to be changed. We need to switch. 20% should be bear by the methane producer, by the biomethane producer, 80% by the system. If you think about whoever is going to invest in the biomethane plant, is producing locally a renewable gases, we should help them. Our role is to reduce the cost of the connection, but I think the role of the system should take care a little bit more of the cost of the connection. We are studying also the concept of the reverse flow. We have taken two grids in Italy. One is located in north part of Italy, the other one in Puglia, where we are going to have local production of biomethane, and we are studying how to make the reverse flow in our grid. To make these two productions available into the grid without interrupting in case there is not enough demand. That is on the biomethane. On the hydrogen side, that is more, let me say, activity in the research and development. We have already assessed, in the first phase, the compatibility of the material used in our network with the hydrogen. As you know, we are developing a Power-to-Gas project in Sardinia, where an hydrogen lab will be located. We have a very interesting MOU with Buzzi Unicem. I call it circular economy on CO2. That is quite strange, but I will explain you because it's extremely interesting. Buzzi Unicem is able to capture part of the CO2 that is coming from their production process, from the cement production. Then they said, "What we are going to do with the CO2 capture?" Well, you cannot release in the air anymore. No Because you have captured. You have made the effort to capture, it would be very stupid to release it. The only way you can store the CO2, but then you need to have CO2 pipes. You have a location to store. The idea is, well, if we produce the green hydrogen nearby from our renewable sources, and we recombine the CO2 capture with the hydrogen, producing synthetic natural gas. Buzzi will use, the cement factory, will use the synthetic natural gas to burn it into their industrial process. Then they capture the CO2. The CO2 will be, again, combined with the hydrogen. Hydrogen. It's a circular. What we are studying if, from an economic and from an energy balance, it makes sense. The idea, in se, is a very bright idea. We have international partnership with Jemena in Australia and Marubeni in Japan, about developing new technology in the hydrogen. As I told you, we have already tested, we have already completed phase one, compatibility of our material with the hydrogen. What we are going to do in the second step is to truly test the material in the lab with the hydrogen to see if there are any of our components that has to be upgraded to be ready to accept the hydrogen as a pure hydrogen. Finally, our jewel, our project in Sardinia about the Power-to-Gas. We want to test the whole value chain of the hydrogen, from the production of renewable electricity, up to the storage of the hydrogen and the use of the hydrogen for industry, for mobility, and for residential. Procurement is ongoing. We are waiting the permitting. We are waiting to receive the authorization. As soon as we receive, we will start building the, this plant. Hopefully, it will be online by next year. It's going to be the real proof that the hydrogen can be produced out of renewable, store, and then have different kind of uses, including the blending with the natural gas, using our digital network that has been built in Sardinia. Thank you very much, Paolo. It's very interesting and also inspiring, in my opinion, and not only about the investments and about the digitalization process, but also this part about partnerships a lot, very interesting. I took note at the beginning of your speech of three words, digital, smart, and flexible. Let me add one. Mm-hmm. Efficient. Because efficiency is one of the core concept of the REPowerEU. Italgas already, as long announced, let me say that want to play a leading role to be a game changer. Yes In this field. Where are we, and what are you doing? As I said, we started to invest in the energy efficiency sector back in 2018 when we acquired Seaside. We merge Seaside with the energy efficiency company owned by Toscana Energia when we acquiring a new one that will be merged in this month. We are creating a significant player in the energy efficiency, but our ambition is to become like it is written here, tier one player. We want to be one of the largest player in the energy efficiency in Italy. Let me just describe quickly the situation of the energy efficiency industry. The national energy plan has set in accordance with the Fit for 55, has set the objective in term of reducing the final energy consumption. If you look at the chart, in 2019, 2020, they were on the direction of meeting the targets. 2021 changed the direction. The reason is because 2020 was the pandemic year, so we reduced the final energy consumption, not because we wanted, but because we were obliged to. If we look at the 2021 result, the effort we need to make in order to reach those targets, it's even bigger. Instead of 9, it's 16%. It's a huge number. Maybe you think 16 is not so huge. It's a huge number. Look at the absolute number that you have to reduce in terms of energy consumption in residential. Residential are the buildings. Yeah. In industry and in transport that are the three major. It's a huge effort that has to be made. On the other side, the market. What is the market offering in terms of meeting this objective? The size of the market is significantly big; we are talking about a EUR 5 billion turnover market. The energy efficiency company represent about two-thirds of that market. We feel that the market, because of the objective set before, will grow significantly, but will grow in one direction. In the direction of an energy efficiency that should be innovative, technology-driven, digitally-driven. We see that by 2028, this market will nearly double in respect of today. On the other side, we have a highly fragmented market from a company point of view. Nearly 400 energy efficiency companies are present on the market. 80% of us, they have been categorized as a small size company, less than EUR 25 million turnover per year, as an average of EUR 3 million. Can you imagine, all small, this small company. If you want to achieve the target that the national energy plan has set, we need to have larger player. I think Italgas can play a significant role in consolidating this market, similar to what we have done in the gas distribution. Very, very similar. Let me identify the ambition. First of all, we want to make Italgas itself as a showcase. We want to apply the technology that we have in-house to reduce the final energy consumption to our company to demonstrate that it's possible, and you will see later on the targets that we have set, to demonstrate that it's possible to significantly reduce the final energy consumption. We want to then use the three companies that I mentioned before to enlarge their customer base, offering digital service, innovative service, new technology service to enhance the energy efficiency. Finally, through the M&A activities, we want to, through a selective approach, to consolidate those energy efficiency company that are the most innovative in terms of product or services that are presenting to the market to help them to grow. Because to do it, to grow in this market, you need a big shoulder. You are not... That is impossible to grow if you are a 5 million turnover company. If I translate this ambition into numbers, today, we are still small. We are around 1% market share. The EBITDA margin is nice, 20%. We want to invest nearly EUR 350 million to grow, to bring our market share in the range of 6%-8%. With a selective approach, I told you, because we want to keep the marginality, the EBITDA margin in the range of 15%-20%. What does it mean? We want to stay in a segment of the market where technology, digital innovation is the core, and where the margins are higher. We don't have a legacy. We will never do facility management. I'm anticipating some of the questions coming from the analysts. We will never do facility management. That is not the arena where we are going to compete. We will compete in the high technology, digital energy efficiency. That's the way in which we will be able to achieve the target, well, to achieve the targets set in the energy plan, keeping the marginality at this level. Thank you very much. Long answer. No, we are really deepening into the strategy now. Now, let's take a journey, I think, out of Italy. Mm. After 20 years, Italgas has returned to crossing its national borders, and does so in Greece with DEPA Infrastructure's acquisition. It's a sort of back to the future, isn't it, and why? Well, as you said, we were in Greece 20 years ago, and we participated in the international tender that was launched back in December 2019, and we won. Now we are waiting just the latest approval that is coming from the regulator. We have already got the antitrust approval. We are going to be the only distributor of gas in Greece, and I think we can bring a lot of value also to Greece. Apart from Thessaloniki and the Attica region that has been developed since the last 20 years, the remaining portion of Greece have limited access to the gas distribution. We are going to put a lot of effort in developing the new network, with the idea that once that you lay down the network, you think about the future. You are visionary, so you don't think only that today you are going to distribute natural gas, but you think about a network that will be able soon to handle biomethane or hydrogen, similar to what we have done in Sardinia. Our idea is that we can help the Greek government to move into the future. You mentioned back to the future, so to move into the future, and to achieve the decarbonization target that the Greek government has set for the country. We are looking forward to start. We are waiting just the last approval. Our plan today that we are going to present, and Gianfranco will tell you more details in terms of numbers. Our plan contains already Greece. Let me say the plan of Greece is the sum of the three plans that we receive from, we call the targets, from the three companies. Why I'm saying that? Because the tender rules do not allow us to have a continuous discussion with the management, and of course, up to the closing. Our idea is that we wanted to give to the market an idea of the Greek investment, but we were not able to go into deep discussion with them. We put together their plan, but as soon as the closing will take place, we will immediately start discussing with the management of the plan, and I'm sure we'll improve it. As of today, we see by 2028, according to their projection, that the number of delivery point, the number of final customer will double. The penetration rate in Greece is very low, except in the Thessaloniki area. The RAB of the three companies will pass EUR 1 billion by 2028. Overall, we expect to invest EUR 1.8 billion, EUR 1 billion for the acquisition, and EUR 800 million for the local investment to expand the network in Greece. We are looking forward to start working. Hopefully, the closing will take place during the month of July, before summer. That's it. We were telling before that Italgas won't become a facility management company. You're not interested in this. Maybe there are some other areas, some other industry sectors that can, you know, be interesting for you and for the company, isn't it? Yeah, that is true. I mean, that is something that is not new to the market. The first one is the water sector. I give you only three numbers, so at least you understand why we are very interesting. Our leakages in our network has been in 0.1% last year. The losses in the electrical system in the distribution are close to 10%, 100 times. The losses in the water distribution as an average are around 40%, with a peak of 70% in the south of Italy. Mm. 0.1, 70%. I mean they are not network. No. What I wanted to say to you is, if we move all our technologies and the competence to the water distribution, can you imagine the step forward, the improvement we can make on the water distribution? Water is going to be a limited resource. We cannot afford anymore to lose such amount of water. Imagine if we are able just to reduce by 10 times, and we are still in the range of, say, 4%-7% the losses, which is the saving in terms of water. Our idea is that all our technology, and I can tell you by experience, I've been managing water distribution in my past career, it's really easy. It's easier in the water than in the gas. Just moving the technology there. For example, we are trying to do that in Caserta. We are replacing. Caserta is the fine municipality where we manage the water distribution. We are replacing the meter with the smart one. We are trying to add equipment. Unfortunately, on the water sector, to do investment like that, you need to have the local authorization. We are requesting locally to be authorized to invest, because that will go into the tariff, so that's the point. Still few cents we are talking about. We are still waiting to get the final authorization to really announce and make the fine municipality in Caserta an example of what we can do in improving the water distribution. That's reason why we have allocated EUR 160 million in M&A activity in order to move into that, into the sector. We feel we can bring value to our country, we can bring value to the system, just applying our technology. That is one. The second one is on the innovation again. Like, you know that last year we spun off all the IT activities in one single company. It is called Bludigit, that is 100% controlled by us. With two objective. The first one is internal objective. We wanted to be even more efficient in developing new application, in evolving our IT system, in improving the digital transformation. I think we have been very effective in the last year in doing that. The objective was very clear. The second one that is a secondary from certain point of view is that some of our application can be put on the market to our peers in the same industry, also to our industry. We are starting little by little to do that. There is one example. We have created a partnership with Salesforce. I think you know everybody knows Salesforce. We are developing with them application that is called CapEx Force. It is a series of application, not only one, that is handling all the process relevant to an investment. For starting from planning, engineering, permitting, realization, construction and operation. We felt we had a need to do that. We manage thousand of small and medium investment everywhere in Italy, and we wanted to keep track of that to be more effective, to stay on budget, on time. We didn't have the tool, so we said, "Let's try to develop an application that is helping us, that will help us to manage the investment." It is true also for many other companies in other industry. With the partnership with Salesforce, soon on the Salesforce platform, those application will be available for other operators. We feel that the commercial support, the commercial strength of Salesforce will help us also to sell to other companies, to other industries, the application that we have already developed and some other that will be developed very soon. Thank you very much. As I was saying at the beginning, this is a story of the future, how to reshape and recrafting the future, not only of the network, but much more as we just listen. I've got a final question for you. This final question brings us back to the sustainability matters, to the sustainability question. Since in the plan you are describing the goals of decarbonization are clearly core and sustainability, we can say by definition, is not just a part of a development strategy, but it pivots of many actions of Italgas' strategy. Can you describe us- Yeah some of them? As I said, we want to leverage our energy efficiency activity to make Italgas as a showcase, to demonstrate to everybody that if you apply the concept of energy efficiency, you can really save energy consumption. You can really reduce the energy consumption. That was already a target that we set last year plan. If you remember, was 25% reduction by 2027. Identifying all the action needed to reach that in relation to the baseline set in 2020. This year, we have enhanced the objective. We have enhanced in terms of value, 27% by 2028, and 33% by 2030. Because we during this year, we were able to evaluate on a monthly basis the progress in reducing the energy consumption. There are many areas in our industry, so think about that we are using gas to preheat the gas before distributing it. We are working hard to reduce the consumption there. We also use electricity, so we are monitoring our equipment that is using energy, electricity to reduce it, or eventually to use renewable energies. Installing photovoltaics, more photovoltaic plants in our location. We have not limited to the industry side. Also, all the real estate, also this one, this new building where we are now, is under a continuous monitoring to really understand where we can reduce the energy consumption. We are trying to demonstrate that an industry can really apply using the most modern technology in the energy efficiency, achieving significant final energy consumption. If you reduce the energy, there is an immediate result, where you reduce the CO2 emitted. Even though here we need to increase because, you know, the leakages that I was talking about, 0.1%, still represent the majority of CO2 emitted. Also in this case, Scope 1 and 2, we have increase our goals. We were 30% in 2027, now we are 34% in 2028, 42% in 2030, 0, that is new, in 2050. Now we know how to get to zero. Last year, we didn't know. Now we know how to get to zero. Somebody says, "Oh, I'm getting to zero in 2050," because he's not going to be there by that time. Now, we have identified a series of action that will bring us to be zero in 2050, net zero carbon. The new one is the Scope 3. Scope 3 is relevant to the, our supplier. We could have used an approach like a standard one. Imagine that the standard is the emission is linked to what you spend in procurement. When they told me, I said, "That is not true. That doesn't mean anything." What we have done in the last 12 months, we have been working with our supplier to bring to them the same approach we are using. The same approach is you need to study your industrial process and trying to identify where you can reduce the CO2. Now, with our, the majority of our supplier, we have been able to push them. Some of them were already there, so some other not. The majority now is in line with the method and the methodology that we are using to reduce Scope 1 and 2. We are now able to define the objectives for 2030 and for 2028. We have rebuilt the baseline of 2020 to align all our targets. By the end of 2022, we will be able to say which is the CO2 emitted by our supplier in providing us products and services. We should not forget the ESG social targets. We presented them last year. Again, we are increasing the objective engagement, the first one. Women and responsibility, somebody may say like you, what, 25? This is a small number. Well, you don't know the legacy. You don't know where we came from. This was at least a very conservative and traditional company, very man-driven company. Today is not so much anymore, but we still have a legacy to change. We will do it similar to the decrease in terms of average age. As you can see, when we demerge from Snam, our average age was nearly 52 years. By the end of the plan, we will be less than 46 years as an average. That's a great opportunity, but also a challenge. An opportunity because you bring in to the company new resources with new competence in digital. It's nice. On the other side, you lose specific competence of the people that have been working with us in the last 40 years. Matching and bringing together this opportunity and risk is the way to move forward, not losing the competence that you have in the company, but adding new competence coming from outside. You can do that with the last KPI, that is the training hours. You can only do with putting together a number of hours to our people, let me say to the more aged people in terms of digital, and to the younger people in terms of technical. Making together these two components, then you are able to face the challenge and the opportunity of reducing the average age of the company. Thank you very much for this last slide about social targets, which are very, very crucial for the sustainable development of companies, and thank you also for the environmental targets I asked you. This was the last question for you, and I will take the chance to ask one question now to Gianfranco Amoroso, CFO of Italgas. Gianfranco, I came to you with numbers. My question goes with numbers, and how does all this we've just seen, we've just listened to can be translated into numbers, and could you deepen for us in the Italgas investment plan for the next seven years? Thank you, Francesca. You know, CapEx plan is key for us. It's the most important, one of the most important value driver for a company regulated like we are. This year, this plan reflects a new allocation of the CapEx in an updated scenario. It is an updated scenario because there are many moving parts, interest rates, inflation, geopolitical international crisis, change in our perimeter. A lot of things. Also, as a consequence in this slide, you will see a lot of moving parts if you compare this slide with the one we had in the last business plan. Let me start with the gas distribution in Italy. One way or the other, it will attract the majority of our investment with a number of EUR 4.5 billion. It will include digitization or digital transformation network, the completion of Sardinia project, centralized asset, M&A, and disposals. On the other side, you will see, you will find the CapEx devoted to Greece. It's EUR 1.8 billion, and this number include the CapEx for the acquisition of the 100% of the stake of the infrastructure and the acquisition of 49% of the assets. Adding to that, the CapEx that are included in the business plan that we have received from the three companies. Now, diversification reached an amount of EUR 500 million, up EUR 300 million compared to the last plan. This is mainly driven by the ESCO, the growth in the ESCO business, and the CapEx that Paolo already have explained. Finally, we have here EUR 1.8 billion for the tender. This number includes EUR 1.1 billion for the net acquisition of the network during the tenders, and seven hundred million approximately for the CapEx related to the network that we acquire. Let me give you some more details on the network. The total amount is EUR 2.9 billion. Now, here, the focus is more on the repurposing and upgrading and maintenance of our network. This cluster is more than 50% of the total number of 2.9 million, followed by the extension of our network. Also the technical innovation and the energy efficiencies is becoming more important because, you know, in this environment, we have to get some savings in the electricity and gas industrial consumption, as also Paolo explained. Finally, I will point out that our project in Sardinia is approaching the completion, and we have there approximately EUR 200 million to complete the extension of the new grids in Sardinia. Moving to the digital transformation, I will not comment anymore on the different items that have already been explained by Paolo in terms of the different example of applications. I will focus more on the figure. EUR 1.5 billion is a huge number. It's slightly above the number we had in the previous, in our previous plan, despite the fact that we are now completing, as you know, the replacement of our smart meter. If you ask how this is possible, well, the answer is that this figure is supported by a new wave of replacement of smart meters this time, not traditional, but smart. As you can see in the picture, in the last three years of the business plan, we are planning to replace our smart meter cluster in order to be prepared for the phase out of the GPRS technology that has been announced by the telcos for the year 2029. We are planning to reach by the year 2028, about 4.5 million of new meters internally developed, as Paolo was explaining. This will be supported by a line of CapEx, which will amount slightly below EUR 200 million for each year 2026, 2027, and 2028. About EUR 600 million approximately in total. Now, the digital transformation has, of course, an impact in terms of P&L impact and potential benefits, which is important, of course. This year we are flashing a figure of EUR 300 million, which is increasing compared to the figure that we had in our previous business plan. The good news is that is made of EUR 240 million-EUR 250 million in terms of EBITDA impact, and the remaining is a saving in the CapEx. The new thing is that this year, the digital transformation not only has an impact on the traditional areas that you know and that we have put in the previous plan, like ICT and operations, but nowadays the impact is spread all over the company in other different areas. For example, we have made some example here, procurement, HR, regulation. Moving to the tender, let me explain how we arrived to the figure of EUR 1.8 billion that we have shown previously. Due to the low visibility on the timeline, impossibility to, let's say, to maintain a calendar, each year the calendar has to be reshaped and postponed, we have decided to put a cluster of tender beyond 2028. This imply a couple of things that I will tell you. The first is that the market share that we are projecting in the final year, in 2028, is now 42%. But the final market share remains unchanged at 45%. The point is that now it will be reached after, when the process will be completed. And this is just math, no matter what. The other important thing is that we are postponing the amount of CapEx of EUR 350 million approximately for this cluster of tender that now fall beyond the time, the time horizon of the plan. To sum up, investment are still growing. If you look at the scenario without the tenders, you have a gross CapEx of EUR 7.1 billion, compared to the EUR 5.9 billion of last year plan, which implies a growth of 22%. You will appreciate that the light blue block now is slightly lower due to the allocation of the CapEx that I explained, but it is compensated by the dark blue one, which is, DEPA. The green one, which is the investment in the energy efficiency sector. You have also a disposal, because the figure that we are commenting, which are a total, we have a total of EUR 8.6 billion that you find on the right, are net of almost EUR 400 million of disposal. Mm. I will be more precise later. If we look at the scenario with tenders, now you find a gross CapEx of EUR 8.9 billion compared to the 7.9 of the last year business plan, which imply a growth of 13%. Also in this scenario, you will appreciate that the orange block is slightly lower due to the postponement of the EUR 350 million that I've explained in the slide before. All this CapEx plan has an impact, of course, in our RAB growth. I like to comment this slide starting from the organic perimeter, but this year I will include in the organic perimeter also DEPA, because, you know, the transaction is there. If you consider organic perimeter and DEPA, you get to a RAB growth on average of 4.5%, slightly above the figure that we had in our old business plan. If you sum to this all, the tenders that we have projected, you arrive to a figure of 6.4% on average. Important for you also to anticipate a question is the deflator that is underlying this figure for the RAB. On average, in the plan, we have a 2.5% on average, and the deflator is peaking this year to approximately 4.7%, and then it will decline toward the end of the plan towards 2.2% or 2%. On the right, the usual picture for the delivery point. The growth of 4.1% is mainly driven by the expansion of the Greek perimeter and the tenders. If you look at the organic perimeter, you will notice a quite flat profile, which is a combined effect of the disposal of the Naples concession, compensated by the expansion of the Atem Belluno, the completion of the Medea network, and the internal growth. I will not comment here the market share, we already discussed that. Now, let's turn on the financial structure. Financial structure, as you can see, is well-balanced in the assumption of our business plan. Operational cash flow fully cover the entire amount of CapEx, and also, I would say, almost all the dividends. There is some new element in the picture this year, the M&A block is now made mainly by DEPA acquisition for, let's say, EUR 1 billion plus the CapEx. This implies that this year we have drawn a bit of our financial flexibility, but still we remain with a sufficient headroom to accommodate, as you can see in the chart, the tenders and to enhance the shareholder remuneration. It's important to remark also that this flexibility is maintained for, let's say, preserving our current rating. Going to the debt structure. First of all, I would like to point out that we can take advantage of the transaction that we have executed and carried over in the last two years. You will see that there are no major refinancing needs until the year 2024. The liquidity that we have currently in excess of EUR 1.2 billion is able to cover short-term outflows and to keep the flexibility adequate buffer of flexibility going forward. Despite the current environment of rising interest rates and volatility, we are still confident to keep an average cost of debt below, slightly below 1.2% over the plan period. Finally, we will give a priority in the future to sustainable finance sources in order to optimize our cost of debt and our tenor. In terms of rating, these metrics are calculated according to the methodologies set by the rating agencies. You find on the left the ratio, which may be the main ratio between the two, between net debt and RAB, and the upper limit of the threshold for our rating has been set at 70%. Just a comment on the profile. The peak, which in this case is negative, is reached in 2022, but is due to the effect that we are assuming in the plan the acquisition of DEPA by year-end, net of disposal of the Naples concession, so around EUR 700 million, without any impact on the P&L for 2022. If you look going forward, starting for the following year, the ratio improves and then come back and land to the, let's say, the position that we had last year at the end of the plan. Similar situation commenting the other ratio, the funds from operation to net debt. Here, the low point is reached projected this year for the same reason I explained regarding DEPA and Naples. You see an improvement, and in the last two or three years of the plan, a significant improvement approaching the region of 20%. All the two ratios make us confident to be able to keep our rating also with the DEPA acquisition, of course. Finally, I will give you some guidance. For the current year, 2022, we are projecting revenues adjusted slightly above EUR 1.4 billion. The EBITDA adjusted will fall within a range between EUR 1 billion and EUR 1.03 billion. The EBIT adjusted has a range of EUR 570-EUR 590. Net debt is projected at EUR 5 billion. That includes EUR 70 million of IFRS 16 impact, the acquisition of DEPA for about EUR 1 billion, and the divestment of the Naples concession for EUR 300 million. We say that the leverage, as I explained before, reached the level of 64.9, just slightly below 65%. If you jump to the final year of the business plan, we are projecting revenues slightly above EUR 2.6 billion, EBITDA slightly above EUR 1.8 billion, a RAB which will approach EUR 12.6 billion and consequently a ratio between EBIT and RAB approaching 8.8%. The leverage, as you can see, is gradually improving and will end in the last year to a level of 61%. Finally, a short talk about dividends. Just to remind you that we are under the current dividend policy that covers until the earnings of fiscal year 2023. Just to recap, the policy establishes that the dividend per share is equal to the higher of 65% of adjusted net income and a growth of 4% of the dividend per share of the fiscal year 2019. Thank you very much, Gianfranco. Thank you for your My pleasure. Precise description and for the guidance and these last numbers about dividends. Stay with me. On stage, since we are starting soon the Q&A session, and that's the reason why I'm delighted to introduce you to Anna Maria Scaglia, who is the moderator for this session of the event. Anna Maria. Hi. If you want to go ahead. Yes. Hi, good afternoon, everyone. I'm Anna Maria Scaglia, Head of IR. We have a few analysts here present in the room, so we will start with the Q&A with them. We'll start with Stefano Gamberini. Please, Stefano, go ahead. Thanks a lot for the presentation. Few questions from my side. First of all, regarding the scenario. EU wants to reduce by 50% the fuel gas, the fossil gas by 2028 with the REPowerEU, and they are also proposing to introduce a ban of new buildings from 2028 for fossil gas. Do you see a risk on your delivery points targets that could be reduced probably due to this reason or not? How you can balance on this topic? The second question regarding the dividend policy. You have such aggressive growth on EBITDA, if I'm not wrong, around 9% to 2028, but in particular, on 2025 you will add EUR 450 million of EBITDA, but the dividend policy finish on 2023. Just to understand why you didn't enlarge the dividend policy also for the following years. The last question I have is regarding the CapEx structure. You reduce, if I'm not wrong, by more than EUR 700 million the CapEx on the network, despite the inflation that is going ahead right now. Is this a trend or it is related, I don't know, for the lower remuneration of new investments? On the other, if you can also elaborate a little bit more about the investment on digital, because you underlined that EUR 1.5 billion also includes EUR 600 million of digital meter substitution from 2006 onwards, but the remaining EUR 1 billion, what does include, considering that, if I'm not wrong, you are close to completion of digitalization of the network. Many thanks. Thank you for the question. I will try to answer to your question and maybe Gianfranco can add some number to give more flavor to the answer. The first one, honestly, I don't see that risk. The reason is that, maybe, and I will say underline two times or three times maybe, in the new construction, you will avoid to install gas connection. We don't see a risk in reduction in a sense that the moment that you abandon fossil fuel, you still have, as we have seen in the scenario, a big chunk of the biomethane and then hydrogen. Those gases need to be distributed. And where there is already a connection with the gas distribution, we have not seen any significant movement into abandoning such connection. Don't forget that if you switch everything from gas to electricity, you know very well that the electricity distribution network will never be able to do that. There is also technical, let me say, big barrier to do that. Again, my point is that if you want to reach the goal of net zero emission, we cannot. We need to work together, electricity and gas. We need to really apply the concept of the sector coupling and to see which is more convenient, if it is more convenient to bring gas, renewable gases or electricity. On the dividend policy, we have a policy in place. Just yesterday, during the board of directors, we did not discuss the policy because it's current, it's valid, it's working. It has been proved to be working in the last couple of years. We will discuss the next policy next year. On the CapEx, and then Gianfranco can add something. Let me just give you an idea, a message about the digital CapEx. Digital CapEx is growing because of the new smart meters that will start being replacing the existing one at the beginning of 2026. Generally speaking, when you start investing in digital transformation, every year you find that there are new features where you can invest improving your digital transformation. It's very similar to the cost reduction. Every three months, we see that we are able to reduce the cost, and that is thanks to the digital transformation. You have dozens, hundreds, thousands of ideas about investing in new digital application, in new digital equipment. I mean, we have, for example, in the digital factory, we have a long queue of ideas coming from all over the company to say, "We want to change the process. We want to change the way that we manage the day-to-day operation, we want to make it digital." The more that you invest and the more you are finding areas. Network is going down because we have invested a lot in the last year, so we have been upgrading the network. That's the reason. Maybe. Yeah. On the numbers. Numbers can help to understand this, our approach. Yeah. Thank you, Paolo. I think on the CapEx network, you are maybe a little overestimating the reduction in CapEx. Actually, the reduction in the region is of EUR 450-500. I explained also the criteria that we follow. This is what has been a careful exercise in order to prioritize the CapEx, considering the return and the timing. This means that the main area that has been, let's say, shifted is related to the extensions, and we gave priority to repurposing and maintenance, of course. This also means that being this CapEx related to extension, this implies also that this CapEx can be eventually brought back if the overall scenario will improve, as partially we are projecting in the plan, you know, in terms of regulation and interest rate and WACC and so on. It's a, like a flexibility that we have, and now we have combined this flexibility with our need to prioritize in terms of return our investments. Why digital CapEx is still high? I gave you some insights before because on one side we are completing the replacement of the traditional meters, on the other side we are projecting a new wave of replacement that has an impact, of course, in the last two or three years of the business plan. Of course, this, if you consider that this has an impact of around EUR 200 million per year in the last three years, and you compare the figure with last year plan, you have an answer, of course. I don't know. I think, Stefano, if you have some comments on that, but this is the answer. The next question comes from Davide Candela from Intesa Sanpaolo. Please go ahead. Thank you for the presentation. I have a few question from my side. The first one is on hydrogen. You talk about that demand will not change on that side from the end users' point of view. I would like you to share your view about the supply side. Which are the main risks related to this ramp up of hydrogen production in Europe, considering that the key cost drivers are electricity that in this period is very high? Which are the main drivers for this big ramp up in the production? Because from my point of view, I see some risk on that especially in the short term. The second question is about regulation. You told I would like to hear your view about which WACC you are assuming over the plan, and with regard to the WACC, and considering that there is the trigger mechanism that is in place with the new regulation, which is your assumption for 2023 and 2024? If you, generally speaking, hear your view about how the mechanism is working, and which are the main drivers in changing the regulatory WACC. Last question, you talk about security, and from my point of view, considering that new gases are coming on stream, like hydrogen, biomethane, biogas, we talk about that, I was wondering if this could raise some issues about security and regulators going forward in the medium to long term would recognize this increasing risk in your activity or in gas distribution activity for the operators and in regulation in general. Thank you. Okay. I will leave the second question to Gianfranco. He will give you the numbers. On the first one, I mentioned, but probably I was too quick in mentioning, when we can expect a decrease of cost of the hydrogen produced out of renewable. If you remember, last year we identified that at the end of the decade. Today, with the REPowerEU, we expect probably that is going to happen a little bit earlier. There will be two driver to reduce the cost of the hydrogen production. Like correctly you mention, the cost of hydrogen is driven for a significant part by the cost of the energy. But in the meantime, there are a lot of pressure and there are a lot of action to reduce the time for the authorization of the new renewable plants. The more renewable will be deployed, will be in operation, the more hours during the day or during the year, let me say, generally speaking, there will be hours in which those renewable are not needed. Think about summertime, photovoltaic. There are a moment in which you don't need them. There will be a surplus. More capacity will be installed in renewable, the more surplus will be available. When we have a surplus of production, as a power plant, you have only two things that you can do. Shut down the plant, first, because it is not needed, your energy. Shut down normally is very costly for renewable plant. It's much better to use this energy and maybe pricing this energy a very low price and store this energy for future use. That's the way in which we will have a reduction in cost of hydrogen. The concept that we had in the past about electrical system, I don't know if you remember, we were talking about 25% reserve margin. That was an old concept based on traditional power plant. Now, to run a system like this one, you need to have two or three times the installed capacity of the peak capacity, and still, you may not be able to keep up with the peak demand. These two or three times installed capacity will make, several days during the year, a surplus of energy that is nearly free. That is going to be one part. The second part, I have shown to you the number of projects everywhere in Europe about different technologies in producing green hydrogen, because one of the elements that is still very high in terms of cost is the electrolyzer. More projects will come into operation, and we will see a significant decrease in the terms of cost of EUR per kilowatt or EUR per ton of hydrogen produced. The two elements, energy will go down to zero, the cost, not because the cost, the average cost of energy will go down to zero, but because you will have energy that has no value or very little value because it's not needed. On the other side, you have the cost of electrolyzer going down because you are moving into a mass production of electrolyzer. These two elements combined will bring the hydrogen, the cost of hydrogen, close or even lower in terms of EUR per kilowatt or kcal, whatever you want to do it, lower than the gas. Today, if you use renewable costs, it's already down, but because of the cost of the natural gas. If you take out that particular situation, I think we still have 5-6 years to arrive to this point. I share your point on the third one. It's not in terms of risk. It I would probably characterize the fact that you have multiple points of injection, multiple gases in terms of complication, complexity. Sooner or later, the regulator will recognize as somehow in the WACC, the fact that the whole distribution activity has become more complicated than ever. The technology on the other side, the digital transformation on the other side, will help us to manage this complexity much better than with the current tools. On the WACC. Now, which is the number that we put in the plan? We have projected the trigger kick in for the year 2024, and we have set that figure at 6.1%. We have kept the figure of 5.6% for 2023. 6.1%. 5.6%. six, yes. We have kept 5.6%. Why? Because of the timeframe to count the, let's say, the days that count for the trigger is very limited now. There is still a possibility, due to the high volatility that we are experiencing in the market, that the trigger will be, let's say, active also for next year, but it's very difficult. In terms of probability, we prefer to be more cautious and keep the current WACC also for next year. The impact is pretty straightforward because you have, compared to the old business plan, 50 basis points times our RAB, so around, you arrive around EUR 40 million. This impact will be neutralized compared to the last year plan because we will go back to the 6.1%. We will keep this. We have decided to keep this level until the end of the plan. As the operator, we don't have any more questions from the room, so if you want to open the Q&A from the telephone lines. Thank you. Ladies and gentlemen, 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. For better audio quality, we kindly ask analysts to pick up the receiver when asking questions and to speak slowly. The first question is from Javier Suárez with Mediobanca. Please go ahead, sir. Good afternoon, and thank you for the presentation and for taking my questions as well. Three on my side. The first one is on the contribution from the energy efficiency activity, that I guess is a significant change versus previous business plan. The question for you is that, what do you assume in terms of additional revenues from this activity, energy efficiency, both in 2025 and then 2028? If I am understanding the business plan correctly, you are not assuming that energy efficiency is something that is going to peak in the next three, four, five years, but is something that is going to be a recurring stream of revenues for Italgas in the medium term, in the period that goes from 2025 to 2028 as well. That would be the first question. The second one is on the tenders. If you can help us to understand the contribution that you have, and that you have in your business plan, again, in terms of revenues in 2025 and 2028, just to have a sense of what this means, what you have included as a contribution from the tenders, that would be helpful as well. On the numbers you are providing guidance for revenues and EBITDA. The question for you is going into the bottom line, on the bottom line into 2028, the growth that you are forecasting for EBITDA, CAGR in 2028, is that something that should be mirrored and should be similar at the bottom line as well? The final question, if you can give us a sensitivity in terms of maybe the EBITDA, obviously that is a related question, in case of tenders suffering again another delay, and what would be just managerial action. I think that as a response to the lack of actions on tender, the company has decided to dedicate resources to another promising market. Is this something that the company could consider again if opportunities arise, i.e., if tenders continue to have to suffer delay, the company could compensate those assets with other geographies. Thank you. Vito? Maybe we start from the contribution provided by the energy efficiency business. In 2028, we are projecting revenues exceeding EUR 440 million, approaching EUR 450 million. The same year, 2028, we are projecting an EBITDA in the region of EUR 90 million. If you want also the figures, intermediate figures in 2025, the level of the revenues is around 200, and the level of the EBITDA is around EUR 40 million. I think I can cover also the question of the contribution of the tenders, same years, 2025 and 2028. In 2025, we have revenues for EUR 80 million. Sorry, EBITDA of EUR 80 million, revenues for EUR 100 million, EUR 99 million. In 2028, we have revenues of EUR 240 million and EBITDA of EUR 190 million. I can answer on the last question about further delay. Let me say that this year we have been, let me say, less positive than the previous year. As you can see, the delay has been bigger than 1 year. Expecting that the tenders will be completed by 2029-2030, so outside the horizon of the plan, it's already a, let me say, an assumption that is not in line with the objective that has been set by everybody. Hopefully we should not be in a position to discuss further delay. Hopefully next year we will present the same tender calendar, because we feel that this calendar is absolutely feasible. Maybe in the previous years, we have been optimistic, but this year we'll be more realistic. Of course, if there are other opportunities on the market, we will look at very carefully and we will evaluate. I think we have not responded to question number three, the bottom line 2028 should be similar with the growth to the EBITDA, right? Yeah. Yeah. I think, honestly, that I don't remember by heart the numbers, but if the EBITDA growth in the EBITDA is a little bit lower than 10% as a CAGR, the net income is slightly over 10%, because we are good in making efficiency also on the interest rates. This is also a target for us. Exactly. Fantastic. Yeah, fantastic. I forget to mention any regulatory development on the competition decree. You can share with us any additional information on the regulatory development for the acceleration of the tendering process. That will be helpful as well. Well, it looks like the introduction of evaluation of the network owned by municipality at the VIR should help the tenders to happen. Let's wait for this decree to become, or this is not a decree, it is a proposed law to become a law, and let's see how the impact will have in terms of accelerating the tender process. We expect that in some of the municipalities that should accelerate because now they have a value in their hands bigger than what it was before at the book value. They should be incentivized to make the tender as a way to sell and to cash in the value of their network. Many thanks. Next question, please. The next question is from James Brand with Deutsche Bank. Please go ahead. Hi. Thanks for the presentation. I just have one question, actually, and that's on the new investments that you highlighted that are gonna start to be going into smart meters. Does all of that go into the RAB? Because obviously you went through a replacement program of all the smart meters, right, that completed fairly recently, and I think from memory, those assumed asset lives for those meters was 15 years or maybe it was 20 years, but certainly longer than 7 or 8 years. Have you kind of agreed with the regulator that it's okay to start the program and it's economically neutral for you? Thank you very much. Well, the reason why we started the development of a new smart grid is because the current smart grid does not have a number of features that we want to have for the future regarding, for example, the possibility to handle different kind of gases or blending of gas. The reason why we underline the fact that in 2026 or 2027, we will start the replacement of the old ones is because we expect, as it was already announced by the telecommunication company, to discontinue the GPRS system. If they are going to discontinue the GPRS system, then the smart meters will become not even more digital. They will not transmit any more data. Sooner or later, we will be obliged to replace them. In 2026, the first gas meters that we have installed go back to 2014, so they have already reached the end of the life. In 2029, they would have reached the end of the life, the 15 years. It's not a matter to have an agreement with ARERA, with the regulator or not. It's a matter that if the GPRS system will be discontinued by the telecommunication because they have the 5G, they have many other systems, and they don't want to continue to do and pay the cost of the maintenance of the system, then sooner or later we'll be obliged to replace them. It's going to happen when we will have multiple gases available in the grid. There will be also a need from a technological point of view to have new smart meters able to handle this different kind of gases. For us, it's a projection. As happened in the past, as soon as we will approach, we will start the discussion with the regulator. I will just remind you that we are developing the new smart meter. It's still under the engineering activity, so it has not been completed yet. We will have next year at the end of next year, the first prototype to be tested. After the prototype will show that all the feature that we've inserted will work well, then we can start the discussion with the regulator. Sorry. Just to be clear, though, there is a discussion needed around asset recovery of the prior investments or there isn't? There is no discussion going on around. The scheme that we have used and we include in our business plan is similar to the scheme that has been already in place by the regulator when we replaced the traditional ones with the digital ones. Same scheme. If any of the meters have still a residual depreciation value, that will be reimbursed by the regulator. Exactly in the same way, if it is, of course, if it has a residual value, exactly in the same way that it was used for the traditional ones. Okay, great. Thank you for clarifying that. Thank you. Next question, please. The next question is from Bartłomiej Kubicki with Société Générale. Please go ahead. Hello, good afternoon. Thank you for this fantastic presentation. Couple of things I would like to discuss. Let's maybe start from Greece. Because I guess the CapEx plan you have presented now is in line with what you presented last year over the summer, so before all the war started, and the intention to sort of diversify away from Russian gas. I wonder if there's any risk or you have any signals from the Greek government that they would like to change the strategy and maybe not to move forward with the extension of the gas grid in Greece, but rather, for instance, to electrify whatever the heat on the. Whatever could be electrified rather than using gas, especially that the dependence on gas from Russia and of Greece is quite high according to the slide you have presented. That would be the first thing. Secondly, just a clarification. If I look at your FY 2022 guidance on EBITDA and EBIT, if you look at the low end, the EUR 1,570 million, it implies EUR 430 million of DNA, while DNA last year was EUR 426 million. There's only EUR 4 million increase implied by this guidance, while you had a record high investment last year. I wonder if there is a miscalculation or maybe there is some changes in your depreciation policy which actually will bring down the DNA. I also checked the consensus. Consensus is much higher on the DNA estimate, which basically means there is a room for an upward improvement in net profit and estimate of the consensus. That will be the second thing. The third thing, on slide number 44, you write something about enhanced shareholders remuneration, and I wonder what do you mean by that? Thank you very much. Okay, I'm starting with the first question. I don't want to repeat myself, but, as I said at the beginning, I said the full electrification vision or scenario is not realistic. Having said that is a general statement. That is true for Greece and for every country, and I explained you the reason why. Renewables are not flexible sources, are completely rigid. You need to rebalance somewhere the rigidity of the renewables. Having said that, Greece is building an LNG plant in Alexandroupolis, if I'm not wrong, and it's currently under construction, and it will bring LNG gas for several billion cubic meters per year. Considering that the current consumption of natural gas in Greece is around 6-7 billion, with two LNG terminals, they are completely independent from the Russian gas. One is under construction already. I think will be in operation next year. The reality is that they are, as the other European countries, they are thinking about new sources of natural gas coming, not from Russia, but from LNG. The need to have a gas distribution develop in other areas, it's a need to replace coal and lignite that are currently used in some of Greek area. We do not expect that the Greek government and, not only, but we didn't have any signal, will move into electrification, full electrification because it's not realistic. On the other hand, we expect that the Greek government will probably try to accelerate the deployment of a new gas distribution. On the second question. On the third one, I will respond later. On the second question? Yeah. Well, I didn't get the reconciliation you propose for the DNA. What I can explain to you is that there is an impact, extraordinary impact in 2022 due to the discontinuation of the DNA of the concession on Naples, which is now considered an asset available for sale. This amounts more or less to EUR 12 million or EUR 13 million. What is the enhanced shareholder remuneration? I don't know. I mean, it's English, you know, you know English better than me, so you should understand what does it mean. Next year we are going to discuss the remuneration policy at the board of director, and you will see. We have always put this statement in the past previous strategy plan. I think we have demonstrated that the current remuneration policy has been higher than the floor that we set. To me that is an enhancement of the remuneration of the shareholder because we have guaranteed a minimum level of remuneration, and we have always been over this minimum amount in the past. Okay. Thank you. Next question, please. The next question is from Emanuele Oggioni with Kepler Cheuvreux. Please go ahead, sir. Hey, good evening, everybody. Thank you for the presentation. I have three questions on my side. The first one is on DEPA Infrastructure. I would like to understand what are the reasons behind the delay in the consolidation of DEPA, and if the closing will materialize in July. We could expect this asset will be consolidated for at least five, six months in 2022. This is first question. Then, you have a strong, very strong track record in reduction of OpEx, also thanks to your investments, your CapEx in the digitization. My question is what we should expect from the regulatory OpEx cut, in particular in 2022 and also along the plan. The third and final question is on your assumption for inflation and so for deflator to the RAB, in particular for the first two, three years of the business plan. Thank you. The reason for the delay in Greece, the regulator has requested of us several documentation. They are reviewing them. They have requested similar documentation also to the three DSO. They are putting together this documentation. Honestly, it took longer than we expected, but we are confident that before summer, I'm thinking about the summer vacation, we should be able to close. In that case, the consolidation will happen in the last four or five months remaining of the year. The guidance we gave you does not include, as an economic result, this number, because we didn't know how many months to put together. It will be eventually an upside in case we consolidated the DEPA Infrastructure before year-end. We have only included the overall investment, so the disbursement of EUR 1 billion. Regarding the OpEx, we gave you the guidance. You have a track record, like you mentioned, about cost reduction. The track record will continue in 2022, and will continue over the years. We gave you the guidance. Guidance contains the fact that there are, let me say, this year two effect. From one side, we'll continue to reduce our cost. From the other side, inflation is starting hitting us either in procurement and in the personnel. We are going soon in a discussion on the contract renewal, and we expect that, of course, because of this inflation, there will be some request. We will try to balance those increases that are linked to the macroeconomic scenario with our ability to reduce the costs. On the third one, I will pass the floor to Gianfranco. He will give you some more numbers. Yeah. About the deflator, I can give you some more details compared to what I explained before. For the revenue year 2022, the current one, the data is official. It's been set at 0.7%. For the next year, that will be the peak that I mentioned of around 4.7%. Then the following year, we'll start the reduction. We will have 3.3%. Gradually the deflator will be aligned to the trend of the inflation. This means that toward the end of the plan, it will be around 2.2.3%. We have a further question from the room, a follow up. Many thanks. Just two things, if I may. The first regarding all the activities excluding the distribution network and DEPA. What is the EBITDA? Because if I understood correctly, from energy efficiency, you will invest EUR 350 million, and EBITDA expected in 2025 is EUR 40 million and EUR 19 million in 2028. This means 3 times EV investments towards EBITDA. Could you explain us how you can get this very strong result, and what is the IRR in these investments? And what are the main drivers? The second, clearly the other activities that are not included in the networks, means probably water or what is not regulated, if you can say that water is regulated, that you plug into the estimates. The second, Gianfranco, could you help us the CapEx to come from EUR 1 billion to EUR 1.45 billion in 2025? We have to add also Naples, that will disappear, I don't know, EUR 30 million. More or less EUR 500 million. If I understood correctly, EUR 100 million should derive from DEPA, EUR 40 million from energy efficiency, if not already included in 2022. Then the like for like and EUR 80 million, sorry, from tenders. It means the like for like growth is in the region of 20% in 3 years. Am I wrong? If you help me to understand the drivers of such a strong growth. Thanks. Maybe I will start from the driver behind the energy efficiency projections. We have already commented that our target is to keep maybe the margin target in the region of 20% EBITDA over revenues. This means that we will have a projection of M&A CapEx, M&A investment of around EUR 340 million in the plan. The driver will be to find targets that comply with this target of remuneration of return. In terms of IRR, a proxy of the IRR, maybe it's better to consider a ratio between EBIT and net capital invested. You have to consider that a very high figure for EBIT to net capital invested can be expected until in the next, say, two or three years because of the characteristic of the business driven by the fiscal bonuses. You know, this area of business implies a very low capital investment because more investment is more related to net working capital. For these two years, the return expressed as I explained is in the region of 30-32%. There will be a low point in 2024, when we expect that the fiscal bonus will elapse. From there onward, you will start around 13% to recover by the end of the plan towards 17%-18%. Well, second question. The bridge between the EBITDA, maybe this one. also the water contribution. Water contribution. Differently from energy efficiency, we have maintained for water contribution the same approach that we adopted in the last business plan. A parametric one, because, you know, the market is very tough to be addressed in terms of scouting and finding of targets available for sale. In our current plan, we have maintained the assumption to have around EUR 100 million of investment. And on average, an EBITDA in the region of 15% of this amount. The return on the capital is not so high compared to, for example, the other business of the energy efficiency. It's more in terms of EBIT, always the same ratio, EBIT over net invested capital in the region of 8%-10%. About the different component of the EBITDA, 2025, as I said, we have the contribution of DEPA. I don't know if you mentioned it. The contribution of the ESCO business, the contribution of the tenders, but we have to consider also the starting of the new level of the deflator that strongly impact, of course, the hub. More than offset the slight reduction in the CapEx that we have commented in the Italian distribution. Maybe we can follow up with more details to understand your compound growth rate, if it's correct or not. Operator, are there any more questions from the call, please? As a reminder, if you wish to register for a question, please press star and one on your telephone. Okay, sure then. Ms. Scaglia, gentlemen, there are no more questions registered at this time. If there are no more questions, I leave the floor to the management team and. Thank you, Anna Maria. Thank you, Paolo, and thank you, Gianfranco. Also thank you for all your questions. Our event is coming to an end, and my hopes are high that now you have the big picture. You can see the big picture about Revolution and Evolution of the Energy System. You know we are living in an age of big changes, and we need companies such as Italgas that can reshape and recraft business as usual and innovate as an enabler of the transition we need to go through. Thanks again for being with us. Goodbye. Arrivederci.