Iren SpA (IRE) Earnings Call Transcript

Good afternoon, and welcome to the presentation of Iren Group's industrial plan. The presentation will be delivered by Executive Chairman, Luca Dal Fabbro; Chief Executive Officer, Gianluca Bufo; and CFO, Giovanni Gazza. At the end of the presentation, as usual, there will be the Q&A session. I will now hand over to Luca to take us through the details of our new plan. Thank you.

Good afternoon to everyone also from my side, and thank you for joining us for the presentation of our industrial plan. Let us start with the strategy section on Slide 3, where we look back at what we have achieved over the past few years and the strategy we intend to pursue over the coming decade. Over the 5-year period from 2021 to 2025, we strengthened the group's organization, the skills of our people, our processes and our collaboration with our supply chain partners. This enabled us to build the capacity to deliver an average approximately EUR 1 billion of investment per year. These investments supported average annual EBITDA growth of 8% and net profit to the group growth of almost 5%. At the same time, we maintain a sound financial structure, which enabled us to weather the shocks of 2022, the sharp increase in energy prices, accelerating inflation and resulting rise in interest rates. Today, we are facing some of the same challenges as 2022. Geopolitical tensions and energy shocks are putting renewed upward pressure on commodity prices from the central banks to raise interest rates. Our role as a multi-utility is to support [ groups ] that make Italy more resilient and self-sufficient in an increasingly complex environment and volatile. This is our renewed commitment for the coming decade: to focus our resources also infrastructure and on areas where we have distinctive capabilities. We want to improve the quality of the services we provide to citizens and communities while combining industrial development with a continued focus on group profitability and financial strength. Looking at the new slide and looking back at the new -- the key milestones in the strategic journey we have built over the recent years, it is clear that the plan we are presenting today represents a consistent evolution of the strategic platform established our initial 10-year plan in 2021. Since then, we have maintained the 3 pillars designed to guide the group's long-term development: the energy transition; the creation of value in the communities we serve; and improving service quality. These pillars remain fully relevant in the next 10 years and continue to guide our industrial decisions, the allocation of investments and Iren's positioning in essential services. In 2025, we took a second equally important step, making our business model more focused. We moved from an extended multi-utility model characterized by a broad range of activities to a focused multi-utility model reflected in our capital allocation decisions. Our aim is to be more selective in our investments and more disciplined in pursuing profitability. With the 2026 plan, we are taking next step, but we remain coherent. We translate a sharper focus into complete growth objectives, operational excellence and the strengthening of strategic infrastructure. Together, these two strategic levers define our ambition for 2025: to evolve progressively from a focused local multi-utility into an infrastructure player of national significance, combining our approved sites to local communities with a greater scale, a strong industrial presence and progressively higher returns. We are reaffirming our identity by making our direction clearer, our investment decisions more selective and our ability to turn investment into service quality, growth and value creation stronger. I will now hand over to Gianluca to take you through our new growth objectives in greater detail.

Thank you, Luca, and good afternoon to everybody from me as well. When we talk about operational excellence, we mean the ability to turn the quality of our operations into a real industrial advantage, one that customers can recognize and that can be measured in our financial results. Our approach has two closely interconnected dimensions: service quality and profitability. The first concerns the quality with which we manage our infrastructure and essential services. Our goal is to make our assets more efficient, resilient and fit for future challenges while delivering tangible improvements in service. To this end, we measure performance using the operational indicators shown on the slide. And these go beyond the pure technical metrics and reflect our ability to eliminate inefficiencies, improve reliability and sustain the quality of our results over time. The second dimension is profitability. Here, we will focus on three levers: efficiency and synergies; digitalization and artificial intelligence; and the productivity of invested capital. We will continue along the path already underway with cost management initiatives targeting EUR 2 billion in addressable cost, organizational simplification and process optimization. By 2030, we will redesign approximately 40% of our IT processes through digitalization and AI. Finally, greater selectivity in investment, a reduction in non-productive capital and the full realization of value from our assets. We increased ROI from 6.7% in 2025 to 10% in 2025. The key point is that quality and profitability are not separate objectives. More efficient assets reduce costs and improve service. More digital processes boost productivity and control. And better execution allows us to realize the benefits of investments sooner. First, in the water business, we will invest EUR 2.4 billion to modernize networks and expand wastewater treatment capacity and protect the resource that is becoming increasingly scarce and valuable. Our aim is to reduce the network losses and improve overall service quality. We take action across the entire water cycle, leveraging technological advances, particularly in wastewater treatment and using artificial intelligence to detect leaks. Second, in electricity distribution, we will allocate EUR 1.4 billion to develop more efficient networks, including the construction of new primary substations. Our goal is to improve the reliability of the local electricity system and ensure greater continuity of service in a context of increasing electrification and the adverse effects of heat waste on electricity network operations. Finally, we will invest EUR 1.2 billion in the construction and upgrading of 4 waste-to-energy plants. This will help the communities we serve become more self-sufficient in waste treatment and disposal, in line with the European regulations. The infrastructure platforms address different needs, but they follow the same underlying logic: increasing infrastructure reliability and self-sufficiency in the areas we serve. Focusing investment also activities is our response to structural needs within Italy's infrastructure. This slide compares the country's infrastructure gap in each area with the specific measures set out in our plan, confirming our focus on the businesses we have just discussed. Let us start with water. Italy's national water system loses approximately 3.4 billion cubic meters of water every year, equivalent to the needs of 43 million people. This figure immediately highlights the economic, environmental and social significance of the problem. As mentioned, Iren has allocated EUR 2.4 billion to the water business and plans to replace approximately 1,700 kilometers of network. Our objective is to reduce water losses by 17% by replacing obsolete infrastructure, [ trending ] monitoring and improving overall operating efficiency. Turning to electricity distribution. According to ARERA data, the average duration of our outages in Italy in 2024 reached 76 minutes per customer, up from 61 minutes registered in 2006 despite the average annual investment nationwide of approximately EUR 2.2 billion. These figures highlight the need to further strengthen networks, make them more reliable and better to support electrification, distributed generation and climate change. Iren's response involves EUR 1.4 billion in investment and the construction of 6 new primary substations, increasing available capacity by 60%. The [indiscernible] area concerns waste-to-energy plants. To achieve national self-sufficiency and meet European targets for reducing municipal [ waste ], Italy needs approximately 6.5 million tonnes of additional [ waste ] capacity. This is equivalent to around 22 new waste-to-energy plants, each with a capacity of 300,000 tonnes each. Iren intends to make a concrete contribution toward closing this gap through EUR 1.2 billion investment for waste-to-energy plants and approximately 1.1 million tonnes of additional annual capacity. This program will double our capacity increase -- double our capacity, increase the infrastructure and self-sufficiency of the communities we serve and convert a greater share of waste into energy. I will now hand back to Luca to complete the strategy section.

Thank you, Gianluca. Overall, our investment program is designed to maintain a disciplined balance between growth and value protection, developing new infrastructure, preserving the efficiency of existing assets and progressively improving the group's risk and sustainability profile. The plan provides [ EUR 10.4 billion ] in investment over the 2026-2035 period, 2026-2035, equivalent to more than EUR 1 billion per year. This is a substantial program not only in terms of size, but also in terms of capital allocation, and it is fully consistent with the strategic focus outlined earlier. Investments will be distributed relatively evenly over the 10-year period. We foresee EUR 5.1 billion investment planned for the first 5 years and EUR 5.2 billion investment for the period [ 2021-2025 ]. Over 80% of investment will be concentrated in the 2 business units with the strongest infrastructure focus, 42% in networks, 21% in environment and a further 21% in energy. Market and corporate quota will each account for 8% of the total. In terms of risk profile, 72% of investment will be allocated to regulated or semi-regulated activities. This improves the visibility of returns and reduce the group's overall exposure to market volatility, making the growth expected under the plan more predictable. The nature of the investment -- of investment is also balanced. 45% will be allocated to development, while 55% will go towards maintaining and renewing existing assets. We are, therefore, supporting both the expansion of our industrial base and its quality, safety and efficiency of the assets already in operation. Finally, 72% of investment is classified as sustainable, confirming the strong alignment between our capital allocation and the group's transition objectives. This slide shows the overall amount. The EUR 10.4 billion of investment envisaged under the plan supports a solid progressive and financial balanced growth trajectory. As in the previous 5-year period, this demonstrates that our industrial ambition is fully compatible with financial discipline that is representing not only a substantial investment program, but a pathway in which industrial development, earnings growth and financial discipline [ reverse ] one another. Let us start with EBITDA, which will increase from [ EUR 1.35 billion ] in 2025 to approximately EUR 1.6 billion in 2030 and around EUR 1.95 billion in 2025 with a CAGR of 4%. This amounts to almost EUR 600 million of additional EBITDA over the decade driven by commissioning of growth investments and improvements in operational efficiency, [ growth ] visible throughout the plan period and supported by portfolio increasing is concentrated on infrastructure based, regulated and semi-regulated activities. Net profit is expected to grow even faster. It will rise from EUR 301 million in 2025 to EUR 385 million in 2030 and approximately EUR 550 million in 2035. Net profit growth outpacing EBITDA reflects operating growth, driven primarily by development investment and efficiency gains despite higher financial expenses associated with the rising interest rates. Financial leverage will remain at 2.1x during the initial phase of the plan to 3x in 2030 and reach 2.8x by 2025. The net debt to EBITDA ratio will therefore remain comfortably below the 3.5x threshold, consistent with maintaining our strong credit profile and our current credit ratings. This will enable us to finance organic growth, support our dividend policy and retain the financial flexibility needed to pursue further organic and inorganic growth opportunities. In this slide, we talk about the industrial plan. The industrial plan is accompanied by an updated sustainability transition plan extending to 2040, so it foresees a longer period of time. This long-term horizon is consistent within the investment cycles of our businesses and the environmental social impacts that unfold over time. We have defined our medium- and long-term targets based on scenarios that we consider credible and challenging, prioritizing pathways that are more likely to be achieved. Our aim is to set an ambitious yet practical and measurable trajectory, measurable and consistent with the expected evolution of the sectors in which we operate. More than 72% of the investments in the industrial plan will be allocated to projects supporting the transition amounting to EUR 7.6 billion in sustainable CapEx. In addition, 62% of total investment will be aligned with the EU taxonomy. These figures demonstrate that sustainability is among the key factors through the group focuses its investments, strengthens its asset base and creates long-term value. From a strategic perspective, we are confirming our five focus areas, allocating approximately EUR 2.3 billion to water resources, EUR 2.6 billion to resilient cities, EUR 1.4 billion to the circular economy and EUR 1.2 billion to decarbonization. Our focus on people cuts across all 4 investment areas, as shown in this chart. Industrial transformation requires new skills, safety, innovation capabilities and an organization able to support the group's technological evolution. I will now hand back to Gianluca for a review of the action plan.

Turning to specific initiatives for each business unit. Let us start with networks. We have a clear priority here, turning investments into tangible improvements in service quality. The plan allocates EUR 4.4 billion to more resilient infrastructure, more digital and more efficient, comprising EUR 2.4 billion for the water cycle, EUR 1.4 billion for electricity distribution and EUR 300 million for gas distribution. Alongside investment in physical assets, we are also planning to digitalize our activities through initiatives such as smart meter installation, remote monitoring and network districting. These measures will enable us to anticipate issues, respond more quickly and manage our assets more precisely. In the water business, we support renewal of networks and facilities with the aim of reducing water losses from 31.4% in 2025 to 36%. We'll also allocate almost EUR 300 million to 4 new wastewater treatment plants, which will increase treatment capacity by approximately 500,000 [ pollution ] equivalents by 2030. In addition, we will modernize existing plants and carry out structural upgrades to reservoirs [indiscernible] drinking water. In electricity distribution, we will invest to accommodate the growing demand for power and halve the duration of power outages. We will build 6 new primary substations and upgrade 2 existing ones, increasing installed capacity by 6% while digitalizing our entire substation fleet. In gas distribution, we will maintain a selective approach focused on safety, the replacement of noncompliant materials and dig with the aim of preserving our already excellent service levels. Structural EBITDA growth in this business unit averaging 5% per year is supported by a 3% increase in the regulated asset base or RAB by 2030 and a 70% increase by 2035. In 2030, results will also benefit from the program. Our projections continue to [ concession ] perimeter through the [indiscernible] WACC [indiscernible]. Our aim is to [indiscernible] across the value chain from waste collection to material and energy recovery. The plan provides for EUR 2.2 billion investment, 71% in waste treatment and disposal and 39% in collection. In waste collection, we are confirming the current concession perimeter and continuing to digitalize and optimize the process assets with the aim of increasing the collection rate by [ 75% ], thus improving the quality of waste streams and the value of materials that can be subsequently recovered. Waste disposal is we are targeting the most significant step change in our industrial capabilities. We plan to deliver 4 waste-to-energy plants, 2 new plants, each with a capacity of 400,000 tonnes and 2 ramping projects, TRM with a capacity of 250,000 tonnes and Poggibonsi with a capacity of [ 40,000 tonnes ] per year. Together, these projects will provide more than 1.1 million tonnes of additional waste to energy capacity on top of our existing capacity of 900,000 tonnes per year. We also plan to build 2 new plants for the treatment of liquid waste particularly generated by [indiscernible] and organic waste treatment facilities, as well as a dedicated plant for treating the ash produced by waste-to-energy plants. These investments will expand the waste value chain. As a result, the volume of waste treated will increase from 2.8 million to 4.8 million tonnes, and the energy sold by our waste-energy plant will more than double by 2035. This growth will increase the infrastructure self-sufficiency of the communities we serve, reduce reliance on less sustainable solutions and strengthen our ability to create value at a [ recycle cycle ]. This expansion will be reflected in business unit financial performance. In the first phase, the EBITDA will rise from EUR 277 million in 2025 to approximately EUR 330 million in 2030, representing a CAGR of 4%, supported by the plans for organic municipal waste treatment and material recovery reaching full operating efficiency. Looking ahead to 2025, EBITDA growth will average 6% per year, driven by a EUR 150 million contribution from the waste to energy plants, which is expected to be fully operational in 2032-2033. Moving on to the Energy business unit. We are pursuing a strategy investing where we have distinctive assets, adequate returns and a clear industrial growth. The plan allocates EUR 2.2 billion to the expansion of district heating and to maximizing the value of our strategic generation assets. District heating is our main area of development. We'll invest EUR 700 million to expand the network, particularly in Turin, make a full use of our available heat production capacity, which will be supplanted by the [ GRM ] waste to energy plant. We'll also build a new district heating plant in Alba, upgrade our cogeneration facilities, particularly in [indiscernible], and add more than 7,000 cubic meters of thermal storage capacity. The volume will increase from 150 million to 140 million cubic meters, bringing tangible benefits for urban air quality. In hydropower, we will invest EUR 650 million in safety and efficiency based on assumption that the concessions will be expanded under the so-called fourth way, which we hope the European Commission will discuss in the coming months. We'll also develop approximately 8 megawatts of new small hydropower capacity and build a 48 megawatt pumped storage system, which is expected to become operational during the second half of the plan period. In photovoltaics, we are slowing the development of new capacity, partly because of increased competition that we have already seen and we expect in the [ FR ] bids. We have allocated EUR 70 million exclusively to complete projects already under construction, representing 63 megawatts of new capacity. Of this total, 8.5 megawatts has been operational since March 2026, while the remaining 54.5 megawatts is expected to be operational from 2028. We maintain a strong presence in thermal CCGT generation, which are essential to ensuring system security and flexibility in the context of electrifying construction and growing demand, including demand arising from the development of [indiscernible]. The 2 new air cooling systems at the Turbigo and Moncalieri will enable the plants to operate from 2028 even in rough conditions and when water availability in channels is reduced while taking advantage of the positive margins typically seen during the summer months. The plan also includes the contribution from connecting a data center located in one of our thermal power plants. This will follow our business model with Iren primarily supplying electricity and making use of the heat generated by the data center's cooling systems. Finally, in energy efficiency, we are focusing on renovation projects for public sector buildings and then the opportunities offered by the incentive scheme [indiscernible]. It's a diversified portfolio spanning hydropower, photovoltaic [indiscernible] generation and heat. [indiscernible] This generates approximately 70% of the [ EBITDA ] generated by semi-regulated activities. Overall, the EBITDA will increase from EUR 278 million in 2025 to EUR 365 million in 2030 with a CAGR of over 5%. Growth through 2030 will also be supported by higher capacity market revenues following the introduction of the new air cooling systems, the expansion of the district heating network, higher thermal power generation. And clean spark spreads are set to average above 2025 levels. We estimate a stable contribution from the ancillary services market of EUR 15 million to EUR 20 million per year. We expect [indiscernible] electricity wholesale price to decline progressively before stabilizing at around 100 megawatt per hour for the second half of 2028. And we also expect that heat spark spread to remain in line with supported in recent years. EBITDA is expected to reach EUR 390 million by 2035, a CAGR of 3%, driven mainly by higher heat sales as the district heating network expands. Finally, the market business unit, where we expect to keep our customer base stable at 2.3 million customers by increasing the number of services sold, improving the quality of our offering and expanding [ post selling ], thereby increasing the value of each customer. In recent years, we have built a strong organizational and commercial platform capable of supporting and increasing the portfolio of products and services and diversifying our sources of value creation. Our model is lean and scalable, combining the proximity of our physical stores with the partners of digital channels, enabling us to stay closer to customers and respond quickly to their needs and to changing scenarios. Building on this foundation, over the coming decade, we will accelerate operational efficiency, leveraging digital tools and further [indiscernible] artificial intelligence across a wider range of processes. Our aim is clear: to make customer interactions simpler, more effective and more immediate by developing increasingly personalized offers. With the customer base remaining stable, we expect average electricity consumption to rise from 2.9 to 3.1 megawatt hour per customer, while gas volumes will decline as unit consumption falls. At the same time, we will maximize the value of customers moving from the production services to the market and strengthen our inbound channels and store network. Our commercial offering will continue to combine fixed price contracts with multiyear terms and variable price contracts. The right balance between these two types of offer will be driven by our objective of minimizing risk and market preferences. We expect customers using favor multiyear fixed price contracts in order to reduce exposure to volatility. Iren's bundled offers combining energy, connectivity, insurance and home solutions will play a central role in our product portfolio. The number of Iren Plus customers will increase from 424,000 to approximately 585,000 by 2035. This will strengthen customer loyalty. And these are separate from the customers we consider on the energy side. We will strengthen customer loyalty, increase service segmentation and help us build broader, longer lasting customer relationships with the aim of containing churn rate over the plan period. EBITDA will decrease from EUR 269 million in 2025 to EUR 235 million in 2030, representing an average annual decline of 2%, mainly due to the normalization of margins and lower gas volumes. Electricity profitability will remain stable at around EUR 140 million, and the contribution from Iren Plus and other services will increase from EUR 11 million to EUR 15 million by 2030, reaching EUR 20 million by 2035, offsetting lower profitability of Plus customers. On synergies, as you can see on this slide, we are continuing the program launched in 2024 with a track record of delivering EUR 20 million in synergies every year. With this plan update, we are further setting our target for 2030, increasing it by approximately EUR 30 million. The higher target reflects a dedicated project set out by an internal cost management task force. Over the past year, the task force has met and reviewed external costs across other group functions and business units, identifying approximately 150 improvement initiatives across 8 areas of intervention. Based on an addressable cost base of more than EUR 2 billion, the transformation program also relies on digital tools and artificial intelligence, process organization, in-sourcing, corporate simplification and effective management of generational turnover. With this slide, I would like to go into greater detail on the main actions already implemented and those to transform the group. First, we are transforming our corporate processes by leveraging digital tools, automation and artificial intelligence to simplify activities, increase productivity and progressively reallocate resources towards higher value-added activities. This also means not fully replacing employees who leave to retirement. Currently, 9 projects are already underway and a further 15 projects have been identified for possible launch in the short term involving several functions. By 2028, we expect the projects already launched to generate cumulative synergies of more than EUR 9 million. We are also expanding digitization to the operational activities of our business units with the aim of improving profitability, increase productivity and preserving and developing technical skills. We expect benefits from automating 10% to 15% of working hours that can be automated. Our project already implemented involved applying AI to customer service activities within Iren Mercato. It involved 950 operators and delivered a 70% increase in productivity with a 99% rate of correct responses while also improving service quality. The creation of centers of excellence will allow us to centralize cost function activities, make better use of expertise, standardize processes and systems and reduce inefficiencies arising from duplication. This approach has already begun with the consolidation, simplification and empowering of engineering functions within the network environment and energy business units and can subsequently be extended to other functions. Finally, we'll manage generational turnover at both management and operational level, turning natural flow of [indiscernible] into an opportunity to learn new skills and professional capabilities by preserving the group's know-how. Let me express our thanks to the new director of the business network and environment and the new director of the business unit market. And to the people that are leaving the group on the 30th of October, thank you very much from all the group for everything you did over your long career. Overall, this transformation will enable us to support the group's growth with a leaner, faster and more forward-looking organization. Let us now turn to the financial indicators on Slide 19. We can see how the planned investment will drive margin growth throughout the planned period, with EBITDA expected to grow and group net profit growing at 6% through 2035. This growth trajectory is underpinned by regulated and semi-regulated activities, which will account for 80% of the portfolio of our waste to energy plants into operation and our investments in network take effect. Focusing on the period to 2030, we confirm average annual EBITDA growth of 4%. The share of regulated and semi-regulated activities remain broadly stable at 75% as growth in networks business unit is complemented by higher profitability from thermal power plants, supported by the already progressive increase in demand. In particular, between 2025 and 2030, group EBITDA will increase by EUR 250 million as a result of the following factors. First, organic growth will contribute EUR 200 million, supported by higher allowed revenues in the networks as the regulated asset base grows, the full operation in facilities for material recovery and organic waste [indiscernible] and the expansion of district heating network. The organic growth contribution is primarily associated with the EUR 2.3 billion of development investment planned for 2026-2030. This is also due to the growth synergies already described, which will contribute EUR 130 million. We expect the energy scenario to have a neutral impact. Our assumptions include an Italian wholesale electricity price of approximately 100 megawatt hour in 2030, down from 2025 levels, and hydro power generation of 1.2 terawatt per hour, a positive spread for thermal generation, higher thermal generation volumes, capacity market revenues of around EUR 110 million and a contribution of approximately EUR 20 million from the ancillary service market. Regulation will also make a small positive contribution as the recovery inflation in the operating cost of regulated businesses will more than offset the expiry of certificates for hydropower and waste to energy plants. The plan assumes a cost of the WACC for regulated business throughout the entire period. Finally, as already highlighted in the first half of 2026, we expect margins in the market business unit to normalize. This reflects the lower consumption propensity among customers and lower unit margins compared with the 2025 results. Before moving to the next slide and with the current year going to close, we believe it is appropriate to provide some near-term guidance for 2027. We expect EBITDA to grow by 3% to 4% compared with our 2020 guidance. Slide 20 summarizes one of the key elements of the plan, the progressive improvement in group profitability as we complete the investment cycle initiated in previous years. We start from an ROI of 6.7% in 2025 and aim to reach approximately 10% by 2035. This is a significant improvement driven not by a single initiative, but by a combination of industrial operational and financial levers. The effects will progress for one another throughout the plan period. In the short term, the first lever is efficiency. Our cost management program will enable us to improve operating performance and extract greater value from our activities. This will be complemented by the group structural transformation and the optimization of our processes through simplification, digitalization and the increasing use of artificial intelligence. This journey is already underway and has accelerated significantly over the past 12 months. It will continue throughout the plan period, with the greatest benefits expected to begin materializing from 2028 onwards. Then there is a progressive ramp-up of the substantial investment cycle across our infrastructure businesses. In networks, we will continue investing steadily throughout the plan period from 2026 to 2035, while the main development phase for waste-to-energy plants will take place between 2029 and 2033. As these investments come into operation, the capital deployed will begin to contribute fully to growth in results and profitability towards 10%. Finally, we will focus on the equity and productivity of invested capital. We do it every day. In 2026, we have already reduced net working capital by selling receivables relating to the super bonds and Ecobonus schemes. Over the longer term, the gradual commissioning of assets currently under construction and reduction of [indiscernible] components in regulated businesses will have reduced the share of invested capital that is not yet productive. Lastly, but Luca will explain it better, beyond the base case scenario, we will also retain the option to realize value from nonconsolidated equity interest and assets belonging to businesses that we do not consider strategic. I will now hand over to our CFO, Giovanni, to review the financial figures.

Thank you, Gianluca. Good afternoon to everyone from me as well. Commenting on this slide, I would like to emphasize that as in previous plans, financial discipline underpins the group's entire growth trajectory. In particular, the net debt to EBITDA ratio will not exceed 3.1x. It will progressively decline to 3.0x in 2030 and 2.8x by the end of the plan, providing a significant financial flexibility buffer against our 3.5x. By 2030, cumulative operating cash flow will amount to EUR 5.2 billion, fully covering the EUR 4.8 billion of cash outflows trend for net investment during the first 5-year period. The remaining operating cash flow will also finance almost 40% of dividend payments. Overall, between 2025 and 2030, the absolute increase in debt will be approximately EUR 700 million. As regards to net working capital, we expect it to increase through 2028, followed by a reduction from 2030 onwards. This decline in net working capital reflects the gradual unwinding of so-called extra tariff components associated with the investment in waste collection and waterworks business. These components are not immediately recovered through [ tariff ]. I will conclude with a closer look at the cost structure of our debt. The average cost of debt currently stands at 2.4%, thanks to a significant proportion of fixed rate debt, which accounts for 95% of the total. The maturing bonds are refinanced, we expect the average cost of debt to increase progressively. Most specifically, we expect it to remain below 2.8% in 2027-2028, reach approximately 3% in 2029-2030 and subsequently rise to around 3.3% after 2030. Our objective is to maintain an average debt maturity of approximately [ 5 years ]. As shown in the chart on the top right, our debt repayment schedule is well distributed over time. This enables us to optimize the maturity and the cost of our funding mix, including the balance between bond issuance and bank financing. I will now hand back to Luca for the closing remarks.

Thank you, Giovanni. As we approach the end of our presentation, we confirm a solid, visible and sustainable dividend policy through 2030. The effective growth in our operating and financial results will allow us to increase the dividend progressively. We start from a dividend of EUR 0.1386 per share in 2025 and expect [indiscernible] EUR 0.1920 in 2030 with average growth of 8% in the initial years of the plan and 6% in the subsequent period. This trajectory reflects our ability to balance 3 objectives: supporting a substantial investment program; preserving a balanced financial structure; and at the same time, ensuring a steady and attractive growth in shareholder returns. The dividend policy we are presenting today is also consistent with the predominantly regulated and resilient nature of our business portfolio, providing investors with a high degree of visibility over the medium to long term. Let us now turn to Slide 24, which covers the strategic options not included in the base case of the plan. These are initiatives identified through our ongoing process of research and assessment for which we do not yet have sufficient visibility or which require further [ technology ] maturity. As visibility improves, these options are incorporated into the base plan as we have done in the current plan, with certain opportunities identified last year. In particular, I am referring to the following: the full consolidation of certain investee companies. In 2026, we consolidated [indiscernible], a company operating waste collection, with the possibility of developing municipal waste capacity through waste-to-energy plants. The new plan now includes the construction of a new line at the Poggibonsi waste-to-energy plant and the new data center connected to our thermal power plant. The opportunities identified previously have therefore become part of development and are included in the plan we are presenting today. Looking ahead, we are assessing further initiatives, which, taken together, could generate approximately EUR 100 million in additional EBITDA. These opportunities fall into 2 categories: inorganic growth and organic development. On inorganic growth, we are first considering participation in tenders for integrated water services such as the one in [ Vitargo ]. In gas distribution, our interest is limited to areas where we already operate additional service or that are geographic adjacent to our existing areas of operation. We are also assessing several potential acquisitions of small and medium-sized companies in the water cycle and environmental services. The initiatives are complemented by our practice of increasing our stakes in strategic companies that we control. Organic growth offers opportunities across almost all business units. In network businesses, we could accelerate investment further. In water, this will be conditional on tariffs, allowing additional investments to be covered with a time frame. In electricity division, we could bring forward the start of construction work on certain primary substations. We are also in discussions with data center developers to assess the concrete prospects for additional projects and the associated opportunities to supply energy. In district heating, further opportunities may arise [indiscernible] and increase the contribution of renewable sources of heat production. We are also evaluating upgrades to existing waste to energy plants. For municipal waste treatment, potential integration with CO2 capture systems. Finally, developments in electricity demand and capacity market price signals could make it appropriate to upgrade thermal power plants, moving towards high efficiency technologies such as the [ class ] turbines. To conclude, let us briefly recap the key pillars of our industrial plan. First, this is a solid plan built on the group's strength which enhances Iren's resilience in an increasingly complex and volatile environment. It remains challenging in the short term. It is based on our strategic focus and capital allocation with EUR 5 billion invested in strategic infrastructure. Second, operational excellence, as described by Gianluca, is the main driver of profitability growth and value creation. ROI will therefore increase from 6.7% in 2025 to 8% in 2030 and ultimately reach 10% in 2035. Third, the development of strategic assets and operational excellence must go hand in hand with our commitment to adopting best practices across every area of the business. This will enable us to improve service quality and translate to improvements into higher profitability. Fourth, as we have demonstrated, the group maintains a rigorous focus on financial leverage, particularly in the current environment of interest rate volatility. For this reason, the net debt to EBITDA ratio will never exceed 2.1x during the plan period, preserving a financial flexibility buffer that will allow us to seize high value-added growth opportunities. Fifth and final point, we confirm one of the market's most attractive dividend policies today about approximately 2% dividend yield, and we expect the dividend per share to grow at an average annual rate of [ 7% ] through 2030. We can now move on to your questions.

[Operator Instructions] The next question comes from Javier Suarez from Mediobanca.

I have some questions. I will begin with the figures target for 2028-2035 and the business plan you presented last year in November 2025. I noticed that the EBITDA targets are about EUR 30 million variation. Could you please explain why you expect this EUR 30 million below the previous expectations? And there is also some expectation of EBITDA. I believe this is linked to the new -- the 4 new waste to energy plants. Do you have an idea when they will become operational? And where are you in the approval phase of the infrastructure? The second question concerns the EBITDA. The target is below in the 2028-2030 period. And I think this is linked to higher prices. Can you please confirm this? And how this increase in interest rates is making your company review the investments? And the third question is related to guidance. In the presentation, you gave a target for 2027 of 3% -- 4% of growth. And do you confirm this growth for 2026? And can you share with us the net income growth not only for 2027 and also the 2.7% net income target growth for 2026? And last question is more linked to governance. You presented a business plan that is very ambitious for the next 10 years. And I would like to know how much the market can be stable from a management and governance point of view that allow you enough stability to make these plans?

Let's start with 2026. We confirm the guidance, which is comprised by a 2.4% increase in EBITDA, a 2% increase in net profit. And these are the continuity with the first year of the plan. Concerning 2027, today, we can give you our forecast regarding EBITDA. We'll be more precise on net profit over the year as usual. Concerning the variations between the old plan and the new plan, I will start from 2028, where actually we do have a reduction of about EUR 30 million in this forecast compared to the plan we presented last November. These variations can be linked partly to the session of [ Iren Acqua ]. In August this year, we gave the [indiscernible]. And this means a reduction of about EUR 30 million revenues in the water side for 2026. And this is also due to the reduction of investments in photovoltaic, while the remaining side can be linked to the environment business unit. Here, we substantially have a slower recovery of margins of the treatment plants. This is an improvement path that we already began. And as we also explained in the half year presentation, we have a recovery in the second semester and a full recovery of the year. And we will be fully in line by 2029 and 2030. These are the main reasons for the discrepancies in EBITDA. Concerning 2030, we are substantially in line. We have about EUR 1.6 billion in target. We also have the effect of [indiscernible] in 2030. In the last plan, we have foreseen EUR 80 million. Photovoltaic should have incremented in last year because we had foreseen to invest EUR 200 million, so about 200 megawatts of installed capacity. But we also have compensation of this negative effect due to the increase in synergies. So the component of synergies mentioned by Gianluca, by 2030, we will reach EUR 130 million. Concerning the [ EBITDA ], we have a higher impact of financial management. We have foreseen this plan about 20, 25 bps more of cost -- of cost of debt from the increase that we will have in the [ emissions ], so in the refinancing. The first one is in October 2027, the second in 2028 for the deadline of the bonds. Giovanni, maybe explain the [ WTA ]?

Yes, I confirm that the significant increase in 2025 is linked to WTE. So these intentions important construct that contribute about 200 [indiscernible] to the improvement of the results in 2025. [indiscernible] is authorized. We are about to start the base. Concerning [indiscernible], the authorization has already started. There is no tender for that, but there are tenders for Liguria and [indiscernible]. And in [indiscernible], we are in a good place with the tender, while on the Liguria side, the tender is fully ongoing. Concerning governance, we have just announced the nomination of the names of some important directors for the new business units net markets. Concerning governance of the 3 delegates, [indiscernible] in a year, and then the investors will decide the governance, but this is what happens in any quoted business. At the moment, the governance is operating in an excellent way based on the results. We are working together, and we are in agreement. And this shows its strength and its results, and this shows our stability and our confidence in our long-term future. We believe in this.

Next question is from Roberto Letizia from Equita.

Update on the hiring. What was the main solution on the regulated WACC? Did the plan already include this regulated WACC? Do you [indiscernible], more clarification on the power generation? Because we see that they are lower in 2028. And in 2028, there is 130 plus for energy prices. And we believe this is very conservative. So how do you foresee to do this on a strategy point of view? And is these potential upsides are then moved to the customers? Could you please give us more information about power generation? And could you please tell us something more on the data center development? When do you foresee the first contribution during the plan?

Concerning WACC, we are in continuity phase because we have not included any reduction elements that could come into effect by the end of the year because there is always an uncertainty situation. And last year, the elements could be evaluated only in the last stage. We believe that if the [indiscernible] is activated, there may be some effects. So the reduction of 20 bps on existing gas distribution and a reduction of about EUR 4 million of the EBITDA. But I would like to stress that the context also gives us some positive effects. As you know, the increase of inflation. Also the [indiscernible] are pushed towards price. And about 30%, this can be compensated by an increase of inflation. Concerning the second question and hybrids, we confirm our position that we also had last year. We will turn to hybrids only if growth opportunities will arise, in particular, inorganic growth opportunities that will justify recurring to this tool. So we did not authorize the emission of further hybrid elements. Concerning power generation, in 2028, this figure was a mixture of first half year that we foresee to be fully sustained and second part of the year in 2028, where there will be a new alignment to the situation -- the previous situation. As a consequence today, there are no large opportunities to have more covers on 2028 because the markets have very low liquidity.