Iren SpA (IRE) Earnings Call Transcript

Ladies and gentlemen, thank you very much for joining us today. Welcome to this conference where the business plan will be outlined and presented. [Operator Instructions]

Good morning. Good morning, everybody, and welcome to the presentation of the new Iren business plan to 2025. We will listen to the Managing Director, Massimiliano Bianco; and to the CFO, Mr. Massimo Levrino. The situation this year is very difficult -- is very different compared to the past years. So we will start this online session by showing a video that will outline our development principles, and then I will give the floor to the CEO, Massimiliano Bianco for the presentation of the outline. We will also listen to the CFO, Massimo Levrino for the financial highlights, and we will then hand over to press representatives for questions. So let's start with the video. [Presentation]

So the floor now goes to the CEO, Mr. Massimiliano Bianco.

Thank you, Giulio, and thank you, everybody. Giulio has quite rightly underlined that unfortunately this year, we cannot meet in presence. And let's hope that we may quite soon meet in person but we are very glad, however, today, to provide you some details about our business plan. And Giulio, quite rightly underlined that we will have the opportunity to comment on it later on. So let's start by highlighting the key achievements of the last years. We have had quite a clear view over the long-term strategy of the group, and we have worked on well-defined targets, targets that have always been achieved so far, even exceeded at times. The strength of the -- the business strength shown by the group over the past years and our efforts towards the future are extensive. Our ambition today is to be able to pursue and to follow the steps that were started last year with last year's business plan. We have been thinking of building Iren's future starting from the strength of our traditional footprint and extending it towards the future to more territories, to more geographical areas. We have already made some steps and we are quite positive about what we can build in the future. If we move to Slide 5 now, we may an overview of the results obtained over the past years. These results show the commitment of the group towards achieving these results and allows us to understand the historical cycle we have gone through. This has allowed us to do some housekeeping to reinforce and to strengthen our foundations and to continue to work with a stronger team, skillful team. And certainly, we are now working on these stronger foundations and this is what we started doing in 2019 at the beginning of this plan. And we are moving forward towards a different kind of development for the future. We are heading towards the growth of our competence skills, geographies and industrial specializations. Over the past -- if we go back to our investment in the past, we have really doubled, more than doubled our CapEx. So we have multiplied our strengths and efforts. And we have sort of pushed and driven development through increased CapEx. This has been surrounded by an overall improvement of our financial structure. And today, we are aware of this financial -- or we are aware of our financial capabilities. And we are certainly determined to preserve our investment-grade standing and we wanted to pursue our efforts in the future moving towards a greater leverage. And it is the discipline that we have demonstrated over the years that allows us to think of the future according to this approach. There are a number of facts that demonstrate that we may be quite positive about the future. In 2020, we dismissed OLT, and this allowed us to increase our liquidity. And we also took benefits from the financial markets, which improved our access to credit, and we have a very solid liquidity or cash position, which allows us to move on to the first period of the business plan with great optimism. If we also consider our net profit, well, you can see that over the years, it has increased considerably. And this has allowed us to become more attentive to yields, to yield. Our yield has become more attractive. However, we do think that the first elite factor of attractiveness of our group is its potential growth. Its potential development. Over the last 1.5 years or so, we have also launched a share buyback operation that has further strengthened the profitability of the group. We have today approximately 11 million stocks that are valued almost in line with the market. And this amounts to approximately 0.9%. What are the strategic pillars or the pillars of our strategy? And how do this match the trends in the industry? Our time horizon is certainly longer than the explicit business plan horizon. This is what we usually do. And this is particularly important in industries like ours. You needed to have a 10 to 15 years horizon in your plan in order to be able better manage your action plans to achieve those results. So this is the approach, and this involves taking into account the maker approaches of the industries we are operating it -- in every year. We, of course, add new details to our plan and to our vision. And today, we can confirm that the view we adopted over the past years has proven successful, both in terms of macro trends and in terms of forecasts. And this is certainly very important in the light of the results that we have achieved. So our view was clear and clearly oriented. The macro trends are still applicable today. You can see that they focus on sustainable resources, energy transition, environment transition. These are targets that, of course, we can achieve and we can grasp the opportunities that result from them. We will see that each of these trends and especially the trends that are associated with resource sustainability, open up a huge arena of opportunities for us. And we consider, of course, that the clients and the geographical areas must be the key focus of our operations. In this respect, the technological developments and the digitalization of processes further strengthen the interrelationships between the various business areas and the industrial trends in the sectors we are operating in. These sectors are certainly allow us to integrate all of our actions. And there is another -- quite another important trend that is quite promising for the future. This is the concentration of these sectors. Consider the waste industry, consider the energy supply industry. Well, they are still quite fragmented, and we expect them to consolidate in the future and Iren may play a key role in this respect in the future. The strategic pillars of our long-term view are based on the combination between growth and sustainability. Planning is a keyword in this respect. Planning in terms of analyzing and implementing ESG -- the ESG goals. ESG goals, well -- or ESG factors do not to involve the listing of the things that have been done, exposed. They involve clear planning before the whole plan is launched. And we, therefore, focus on sustainability and we consider sustainability to be a key factor for our future growth. And of course, with this plan, we once again wanted to stress that our multi-service business model matches our wider approach to circular economy. We have launched the so-called multi-circle economy. Of course, all of this is based on a circular economy. But we are a multi-service group, energy efficiency, district heating, energy distribution, all these circles have overlapping areas. And these overlappings allow us to become stronger as a group because the intertwining of these industrial capacities strengthens our role as players in a circular economy. We will go back to this, but this is certainly a key principle of our multi-business approach. Then we should not forget digitalization and people. Digitalization means that we have to change the way we work. We need to work in a leaner and more effective way with fewer resources. And this can be possible only if our people follow a process that is oriented toward that kind of development, and if our people are supported in this process. And these 2 elements are absolutely paramount in order for the final results to be achieved. And finally, technological evolution and development, innovation in technological processes and also implementation of the various types of technology that in each type of business allow to improve quality of service and efficiency. Our ambition today that is certainly associated and connected to multi-circle economy, to this circular economy that we see in a strengthened way the group is certainly uprooted in a regional market. We have been traditionally operating in the Northwestern part of Italy, and we have been leaders in this area. But starting from this, we are now following development paths on a national dimension we are working in the field. So waste in the fields of energy efficiency. And this is really the guiding principle of our development. It's a big ambition that we have. And really, we want to go national. And we want to do so by starting and by moving from the local level and by strengthening the local level. The year 2020 has been an extraordinary year. The group has proven to be very resilient in terms of quality of services, in terms of maintaining levels of service that are equal to those provided in the past. And it is now clear that our business model is correct, is appropriate and that it is well grounded. If we now move on to Slide #9. We may see some points regarding this strengthening of our local leadership. This is the key to continue reinforcing our foundations in order for our group to become more resilient and to become the driving force towards future growth. Of course, most of our resources will be still allocated to strengthening our local leadership. This is where we have most of our assets, most of our services, where our concessions are located. And on some of these, we will have to undertake efforts to strengthen and maintain them. Just to think, for instance, that we are investing EUR 900 per inhabitant throughout our plan to continue improving our service, we have had some water concessions confirmed, and we have won new tenders, which confirms the strengths in our operation. The starting point is still -- our starting point, however, is still the strengthening of our historical local leadership. If we now move on to Page 10, the national dimension is quite important as well. We are already a national leading operator for district heating. We are already an operator that is very present on the supply market on a national level. Thanks to a lot of initiatives where we were the first local operators, let's think about the program IrenGO or the IrenPay program. We are the only local operator that has already been licensed by Bank of Italy on payment services, and we are even growing this sector of business. So think about IrenPlus, we've been building these products and services for 3 years, and the penetration rate is very good. Thanks to the fact that we worked on these activities for the last 2 or 3 years. And thanks to the latest acquisitions, we've become the first operator in the plasmix treatment and plastic recovery. So we already have lines of business that are already heading towards going national. And thanks to the competency we acquired over the years. And we focused on our customers and on the supply. And as to energy efficiency, our Atena solution project that was launched a few years ago has been boosted recently, thanks to the Ecobonus. And -- but this project started 2 years ago. And it focused on an urban renewal, on urban requalification the main point and the main strategy. Going national is already present for some lines of activity. And in our plan, in our business plan, we will further accelerate that on a national level. Now we go on Page 11. And here, I go back to the issue of multi-circular economy we launched with this plan. Because it is very important to continue our vision to serve our customers, but also to embrace the principles of circular economy. Circular economy is implemented in the vast majority of our activities. For example, let's think about the environment sector. Environment sector is linked with the circular economy. The waste sector is linked with circular economy when we talk about collection and other activities. And it's also reflected in our investment plans. And in our attitude. For example, we have it, we see it in the water cycle. And thanks to this, to our plant, we'll further increase our investments in water treatment plants. Plants that will be able to provide good quality water. We are also trying to reduce the leaks and to increase the technology of the urban networks. These are all virtuous examples that are consistent with the ideas of circular economy. The same can be said for district heating. District heating is efficient from an economic viewpoint, from an environmental viewpoint and also from the viewpoint of heating urban areas. And taxonomies as well are somewhat limited if compared with the wide scope of the multi-circular economy because maybe they focus too much on decarbonization. Of course, we're involved in decarbonization as well. But our generation park is already highly efficient. And I'm referring to the thermoelectric gas plants that are already very efficient. And therefore, the effect on decarbonization are less obvious because we are already at a top level, and that's why we focus on a multi-circular economy. Let's now move on Page 12. And with regard to strengthening our local leadership, we intend to strengthen our business activities and industrial activities in our geographical areas. In 2020, we already tested our business plan with 75% of regulated and semi-regulated activities, and we have the good stable flows. And thanks to this plan, we will achieve a percentage that will be very close to 70%. The multi-service mission will provide further stability to our cash flow and to forecast for income. And at present or today, there are business areas that were traditionally very visible, such as waste, are now an important pillar of our vision of our business plan. And the same can be said for thermoelectric generation. Thanks to capacity market. And thanks to the fact that we were very successful in the capacity market auctions. We now have a better visibility in multiyear projections. As to district heating, and thanks to recent agreements with third-party stations, has increased the volumes and Turin is an example, but there's room for growth. And then the strengthening of our resilience is 1 of our main and starting characteristics. And this plan will further implement that. And last but not least, we have the supply side. The supply side is an important part of our business model of our growth. And by supply, I mainly focus on retail, on the retail side. And in this area as well, we have a considerable growth potential. Slide #13. And here, I go back to what I mentioned before, that is to say, the integration between the business strategy and sustainability. And sustainability goes hand-in-hand with the business plan. And it contributes to set the objectives, and it's in line with the most virtuous international policies. And we certainly set specific and qualitative objectives and we started not only from the vision of the trends and from a longer-term business plan, but we also set a very long-term macro objectives up to 2035. So that the path of the group in the ESG sector will be even more visible. We now go on Page 14, and we see the -- our focus areas. And they are in line with our business plan, and we focus all our operations based on these focus areas. And of course, we'll see and we'll find our focus areas again, when talking about different activities. We have a circular economy that has to do with the environment and with the waste. And the key point is to strengthen activities in the collection activities, and we are making huge efforts. We are focusing on the collection and treatment plants. And we're also focusing on the geographic expansion of the waste circle. And then we have water, the water sector. In the water sector, we intend to further develop our water treatment plants. As an operator, we provide over 75% of the water service in Liguria. And the water treatment plants play an extremely important role for the quality of life of the inhabitants, but also for the quality of the area for tourism. And we are making huge efforts to further increase the quality of this service. It is also important to work with a medium-term vision. And that's why we are working also on the optimization of water sources and on reducing leaks in the distribution network. And this has to do again with the multi-circular economy. We are involved in a major project on hydrogen, for example. We are extremely interested, and we are grateful to Snam for the work they did. And we can immediately benefit from that. Our gas stations are already compliant. Vis-à-vis the use of a 1% hydrogen mixture. We focused on software, more than hardware. And so even investments will not be too high, we can achieve mixtures up to 5% of hydrogen. And we already have plans for implementation that are a bit more demanding to achieve mixtures with 18%, 20% of hydrogen. And so we are already ahead, and we are glad other operators will follow. But the sooner we'll have a hydrogen mixture, the better for everybody. We are already ready, and our gas networks are ready to handle a gas hydrogen mixture when it will be available. And so this is an example. Vis-à-vis the decarbonization, even for decarbonization, we have advanced plan to reduce CO2 emissions. And of course, we are also involved in the environment sector. The CO2 capture is nearer, let's say, technologically speaking, compared with hydrogen. As to -- within the cities, here we have district heating, and we know that the benefit of district heating is an environmental benefit and the Piedmont ARPA organization has carried out very interesting studies on this point. And then we have the focus area of people, which is dear to my heart because people are the true enablers of the success of our strategy. So people are important. Their passion, their corporate culture is the key to the success of our investments. And of course, we are interested in the diversity policies and also in the welfare policies. And then we have the target on Page 15. I'm not going to repeat them, but the message is important. So we've set explicit and clear objectives for 2025 that are in line with the underlying vision. But we also have a quantitative vision, which is more an indication. But we also wanted to certainly have a long-term vision. And 2020 changed a lot of things, and it had a significant impact on a lot of aspects. And a few months after the first reaction and the first thoughts, we are encouraged by what we've been able to do vis--vis the shock we have, and we are also encouraged also for the quality of the service we were able to provide even in this health care emergency. We also have an economic and financial impact, which is compatible with the idea of maintaining all our targets and will also grasp some opportunities to grow. So at the end of 2020, we'll have an EBITDA around EUR 905 million, EUR 915 million. We know that the COVID had an impact of around EUR 15 billion. And we have an impact on the working capital of about EUR 80 million. But this is the impact for 2020. But it will not have a significant impact on the longer-term strategy, on the longer-term objectives. And we are encouraged by the fact that we implemented good actions. And we have a lot of opportunities, opportunities that may arise also from the regulatory framework. The regulatory framework is in favor of investments and will provide some resources and also some simplification that will speed up the implementation capacity of all operators. So in the end, we'll see that this year has been an opportunity to strengthen our business and to speed up its development. On Page 18, we see the specific trends of all the business sectors where we are present. And it's useful to go into the details even though I already mentioned them as networks. And then the water sector, the water sector needs new facilities to support the quality of the service. And once more, here, we have an opportunity for a better remuneration of the service. And so there's a greater correlation between the industrial capacity, the size of the investment and the output of the investment. And then we have the digitalization issue, which is always an advantage for an operator of networks. It's important to take the opportunities, but also to meet the requirements of the service and to increase margins. And then there's the waste sector. The waste sector is one of the areas where we have a more national approach. And there's a lot of room for an improvement because the sector is very fragmented. And there's a lack of adequate facilities to correctly handle the entire supply chain in line with circular economy. And we have to take this room for improvement. We have to occupy this available space, let's say, because this will enable us to have a leading position in the next few years. And therefore, we have to speed up to act as quickly as possible to take all the available spaces. As to energy, we have to combine the sector trends with our implant location. We have a very good asset base. We have flexible gas plants that are ready for our future vision. As they are flexible, they are more compatible to meet the long-term decarbonization objectives. And as to the medium term and long term, they are ready also in terms of safety. And of course, the implementation is already there. But gas implants or gas plants are certainly positive in terms of asset base. And then we have our presence in district heating. District heating already has room for improvement. If it will be supported and small sizes need to be supported. Then energy efficiency. Energy efficiency is a model we developed and now it has been boosted, thanks to the Ecobonus, the incentives on the private sector. And then we have the market business sector. In this market, we are obtaining now the results of all our efforts. And we are ready to go national based on the goodness of our processes and also based on the marginal cost of the industrial platform that will be implemented in the next 6, 8 months. So now we can push to obtain the results of the work we have done in the past. So we go on Page 19. And as I said, we see the networks of the business unit. And the investments are focused on this network. The most important part of our investments focus on the RAB, RAB will be close to EUR 3 billion. I will not go into further details, but what is important to say now is that we have already got to phase 2 in the operation of networks. We have already invested in phase 2 by using more data, more and more data in -- for management purposes. We have invested in order to improve the use of technology through the investments we have undertaken. And more efficiency combines with improved service or improved quality of service in more details, we have a very sophisticated and high-tech plants, the new water treatment plants that we are now building. We have been implementing the second cycle of smart meters for electricity. And there is also one point I would like to make for this plan, we decided not to include new tenders in the gas distribution area. In the previous business plan, we had a small benefit from the completion of some contracts in the areas where we are incumbent. And it did not include the acquisition of new tenders or the participation in new tenders. In this plan, we have decided not to include the completion of the minimum districts where we are already incumbent. And we have certainly the idea how we are planning to participate in tenders where we have good opportunities or good chances to be awarded the tender. So we have recently acquired I.Blu in the plastics sector, new geographical areas in Tusciano, we have strengthened business areas where, so far, we had just a marginal role. The closing of Unieco in a few weeks from now. It has to do with a special waste and this is certainly a new step forward. So the waste industry is becoming more important for our activity, new developments and new activities, new plants. We have new plants in the pipeline also in the plastics treatment area. And so -- and let's not forget the previous plans that have been developed. We will continue, of course, to work on them as well. So all our plans are targeted to cover the -- or to meet our needs in terms of waste collection operations. So quite a number of efforts, great ambitions, but very promising action. The figures really reflect what we have been doing so far. And we are certainly moving towards improving our positioning in Italy, and we want to become leaders in the environmental-related pipeline. The energy business unit, a considerable investment, of course, we will continue our work the new turbine in Turbigo, and we will continue to work also on the capacity market. New capacity is being acquired, and we are also developing the existing capacity. The Turbigo plant will become the more flexible plant in Italy with -- and it will be possible to modulate its operating power within a very wide range up to 1.2 giga. So it's certainly a strategic investment for us to make the most of that asset. And then we have to consider the growth strategy of this business unit that is oriented to and is targeted to improving energy efficiency so far and now flexibility is certainly the keyword in this area. Let's not forget our important operations in the hydro area, the hydro business. We know that sometimes due to constraints from a regulatory point of view it's quite difficult to lay down longer-term plans, but we will continue to work on existing plans, and we are certainly working on current installed capacity. And based on this, we may play a -- we can play a key role in this business. And finally, let's consider the market business unit. The scalability of our business model has already been completed as far as this business unit is concerned. And we are moving towards full operation on a national level, step by step, which means that the fact we are already a national operator, and our investments will be in line with our overall business plan. Over the years, we have undertaken a number of efforts to renew our processes to improve our marketing skills. A number of projects IrenGO, IrenPlus, IrenPay. All of these are features that make it possible for our retail-oriented supply to be a scalable business. And of course, we will work hard on this scalability aspect in the years to come. Final point, Slide 23. As already mentioned several times, our digital and people action plan. These 2 pillars have allowed us to cope with 2020 successfully. And we have learned once more how important it is to focus on the digital efforts and on people in order to move forward. 80% of our headcount has -- have been working from home or with flexible models of work since February. We have certainly been very flexible with our field workers, and our goal was, of course, to protect their safety and their health. We have been investing on this, and we will continue to do so. This involves improving our culture, improving our skills. The more effective we are on digital and people, the more resilient we will become to cope with unexpected events. There will be unexpected events, and we will be more capable of dealing with them. Our CapEx plan. We have seen the strategies, it's quite an ambitious plan. EUR 3.7 billion CapEx invested, plus 12% versus the previous business plan. And these investments are concentrated on asset -- on regulatory asset base and development. This has to do with the networks and with the collection -- waste collection operations. It has also to do, of course, with the development of environmental-related plans, district heating plants, the development of Turbigo plant, energy efficiency efforts and so on. So a big share of our investments and of our additional investments have to do with the greater profitability in the medium-term for the whole group. When talking about sustainability, of course, we set the goals, our action is compliant with those goals. If you have goals and targets, you need a CapEx, you need the investments. So you have a good share of these investments that are allocated to sustainable projects and net of decarbonization, all of these investments are related to our multi-circle economy view. Slide 26, our EBITDA is growing, the CAGR goes up to 4% versus 3.6% in the previous business plan. And all this allows the medium-term profitability of the group to increase. So the growth is much stronger than budgeted, than expected. And despite the short-term uncertainty, this plan allows for more visibility. Today, there is a very strong commitment, institutional commitment and a very strong commitment from the overall social and economic background in order relaunch the country and to promote recovery. So the profitability that we may derive from this is certainly based on CapEx and opens up a very interesting perspective. I'm now giving the floor to Massimo Levrino for more comments on financial highlights. Slide 27.

Good morning, everybody. Net debt increases from EUR 2.7 billion to EUR 2.8 billion. You can see that we have EUR 3.7 billion of CapEx strongly increased EUR 400 million more than the previous plan. This is quite a considerable increase. Then there is an impact from the point of view of consolidation EUR 240 million for 2020, including Unieco, I.Blu, Sidigas and SEI, the net working capital increased by EUR 170 million. This is not due to COVID. But it is due to the fact that activity has increased. For instance, in the energy efficiency area or in the waste collection area, and this has led to an increase in net working capital. Then at the end of the business plan, the CapEx goes down. And this results in an impact on net working capital. The use of funds, which certainly impacts the cash flow, we will use some of the funds for some expense on the waste -- in the waste area and also for some personnel-related bonuses. Funds from operations of EUR 4.9 billion. This is quite a high figure. This allows us to finance investment. And this allows us to be left with free cash flow of EUR 740 million. We have to consider that the hedged national capital goes down, and the final impact is certainly positive. We certainly have EUR 985 million of dividends. And we will give you more details about dividends later on. If we move to Slide 28 now. You -- we can see once more that the investment grade -- maintaining the investment-grade rating is our priority. We are focusing on this. The chart you can see the development of debt. It has gone up in 2020 due to COVID. The CapEx increased by more than EUR 100 million. And the consolidation, at EUR 140 million. So of course, net debt is affected by this. It will remain substantially stable in the year -- in the subsequent year and will gradually go down until 2025. The net debt EBITDA ratio goes up slightly and will then decrease to 2.5 in 2025, which is in line with the previous last year of the previous plan. So please consider that the 3x threshold is confirmed. However, we think that we will range between 3 to 3.5 range in order to grasp the growth opportunities ahead of us. There is also to consider that we have a good level of investment flexibility so that we can really be flexible with investments from year-to-year in order to be in line with this ratio. We have also reviewed our leverage because there are some components that provide us with a greater financial strength. Through the disposal of the old -- of old stake, we obtain a capital gain in 2020, which impacted on gross debt, which is used by the rating agencies to calculate the ratings. Over the year, we have demonstrated that we can raise funds on capital markets. And that's where as well, since 2015, we have issued bonds and collected EUR 3 billion, and we have obtained approximately EUR 500 million from the European Investment Bank. On the capital markets, thanks to the current policy of the ECB, there is a good level of rates and spreads are good as well, and we want to grasp the opportunity. The cash flow is very stable and very strong. Our regulated activities account for 70% of our operations, which allows us to have very predictable cash flows. For the -- we can move on, I think, now to Slide 29. Our funding needs. You can see in the box in the top left corner, our debt maturities and the development of our debt to 2025 with EUR 565 million. We have already undertaken a sort of a prefunding effort, thanks to all the disposal. We still have EUR 600 million liquidity available. So the total -- the cumulative expiring that amounts to EUR 2.040 billion, and the total refinancing needs amount to EUR 1.2 billion. You can see that we -- that the debt to be refinanced, our gross debt, which is the key point, will decrease by EUR 100 million, thanks to the fact that we have this -- thanks to all disposal and thanks to the contribution to our financing needs from the group. We have already a number of credit lines activated with the EIB and the Council of Europe, and we will, therefore, use them also in the future years. The debt structure shows bonds 80%; loans 20%. And on average, we will keep this allocation, and the floating rate component is very low, 40% as of today, and it's not expected to increase over the plan. The cost of debt will go down from 2.40% to 1.60% percent. It will progressively go down, and this is -- thanks to the liabilities and prefunding action from the past. I think that this is all. Let's consider the indicators. We have already seen the EBITDA, I will more focus on EBIT more. EBIT increases with CAGR equal to 4.4%, and the strong growth in EBITDA also compensates for the considerable increase in amortization and depreciation, which increases by 20% per year. And as for the net profit, you can see the trend. There will be an increase in CAGR by 6.8%. And the average cost of debt will be reduced by 30% at the end of the plan versus 2019. I give the floor back to Massimiliano.

Thank you, Massimo. Page 31, dividend policy. Here, we took a precise decision based on what we've seen before, 2020 has been a difficult year. In the next 3, 5 months, we'll still have uncertainty. And therefore, when we had to confirm the medium and longer-term policy, we go from 10% to 8%. But in the short term, for 2020, 2021, our growth will slow down. But that's not a quantitative decision. But it's a way to stress the fact that the group has identified very interesting opportunities for growth. The financial leverage will be further pushed more than before with the new characteristics, with more soundness, but we also would like to launch a signal of a financial position in a difficult year. That's the logic at the basis of the small review concerning the total context of the development of the group of the dividend policy. Page 32. It's very important to understand that the room for growth that is possible, thanks to this plan, will not exhaust our horizon, let's say. The plan -- the next plan has identified further opportunities for growth. Opportunities for growth that are difficult to identify point by point, but we are working on it, and we hope that these opportunities, these options will be an integral part of our plan. That's why it's very important for us to combine the financial discipline, and we stress once more the strong commitment towards maintaining the investment-grade with the maximum growth potential because, as I said, there's a space available, and we don't want somebody else taking this space. We have historical geographical areas where we are incumbent, and they are an opportunity for growth. We also have an opportunity to grow in the plants in order to grow in the sector of the waste -- of waste treatment. And then we also have the energy sector that is linked with the district heating and the prospects -- future prospects of the hydroelectric sector, once we'll have a more clear prospect. And then we have a very interesting project to combine battery storage system with our thermal electric plant to enter the market even more quickly than before in the thermoelectric sector, and this could be then multiply and implemented on a large dimension, a large size. And then we also have extraordinary operations. As usual, we have a considerable pipeline. The priority is to consolidate our business model, to consolidate our strategic priorities, but we also have smaller activities that are perfectly compliant with our plan. And we also have additions to operations that have been completed. An example is Unieco. Unieco has an important number of nonconsolidated companies that could be considered as an opportunity for growth. We have multiservice subsidiaries, and they are part of the group and that we can exploit them for short-term operations. And there are also further opportunities. And then, of course, there's always the opportunity to start bigger operations and transactions and of course, we have -- we'll have to combine them with a precise financial discipline that is in line with the overall plan investments. Investments are, to say, modular, and that's an important characteristic to be able to combine all possible opportunities. On Page 33, just a few words. We are going through an exceptional period -- an exceptional phase, and opportunities can always be taken in exceptional periods. We have different options, options that might be extremely important to relaunch the country, but also to support our industrial and business plans or strategies. There are technologies that are very interesting to recover materials that can be used in circular economy, and they could be extremely interesting. And we are now thinking about them to attract funds and to make tests and experiments. So technological evolution is to be supported. And now district heating is no longer a seasonal activity because we have district heating and district cooling. And then we have water systems that can be adopted to eliminate new pollutants or to provide new services, such as the wastewater that can be used in agriculture. So as I said, there are opportunities for growth that could lead to new activities, but these have not been included in our plan. So to conclude, our group is strongly commitment -- committed for development. The group has set long-term objectives, sustainability and ESG criteria that are in line with the market strategies and the implementation strategy. So the plan is based on all this. On top of that, we have further options, further options, we are thinking about. And they could be combined, of course, keeping an eye on the financial discipline, but they could be combined to further push growth. The visibility of our prospects and the visibility of our plan is a value, and it's a proof of the flexibility of the group that increases its quality.

Very well. We now give the floor to the financial community for the Q&A session. And so -- but analysts and investors can ask for the floor. The Q&A session is about to start.

[Operator Instructions] The first question from investors comes from Javier Suarez, Mediobanca.

I have 3 questions. The first one refers to the dividend. I'm surprised by the decision to cut the dividends in the next 2 years. And so to have a more cautious approach compared with the dividend policy that was announced last year. So I would like to better understand the philosophy at the basis a bit. From a philosophical viewpoint, I think it's quite important. And so I would like to better understand the philosophy of the management when you took this decision. Maybe you took this decision because of the risks that you have identified or maybe you saw an interesting opportunity for the group. That's why I would like to better understand the philosophy of this decision. And then this links up with what we heard about last year, the commitment has been changed a bit. I would like to understand better the dividend commitment or the decision, maybe you will review it or you will reconsider it in 12 months next year. So that was my first question. Second question refers to the generation business. I would like to better understand that. You talked about the potential of hydrogen. And it could be very interesting. But I would like to better understand whether you thought in terms of CapEx for 2025. And you thought about an additional CapEx for that, maybe up to 2035. Can you give us an idea of the dimension of the CapEx to take that opportunity? And then I have a last question on the business generation, also a power generator company. And have you thought about being involved in the renewables in the next few years because I think that's very important. So have you thought about that for the next 10 years?

Thank you, Javier, about the dividend. So what you said, your remark is correct. We work hard to be as credible as much concerning the second part of your question. So I certainly don't want to say that we betrayed dividend commitment that we implemented so far. So -- and 2020 has been an exceptional year. So it cannot be considered a year as all the others. So clearly, 2020 led to further short term thoughts. But starting from March 2020, we were right in the middle of the lockdown period, and we confirmed 10%. And we already committed for 10% in the past. So our commitments, and that's an evidence of the seriousness of our commitment. I think that this same seriousness is to be considered in the longer term, both for the past and also for the future. We have to consider that this has been an exceptional year and as an optimistic hope, note, that we hope or we expect it will not be repeated. But of course, there are greater risks. In the short term, there's more uncertainty than usual -- than business as usual. But we don't see particular risks. So the decision was not taken on the basis of the risk. But I think it's an important signal to stress the fact that we wish to take all available opportunities and opportunities have grown in the short run. And of course, we had to maintain the overall balance, but this is a further demonstration of the fact that we have a financial capacity. That's why we can increase leverage a bit more based on the opportunities that we will take. And the opportunities are much more to -- much more important than the difference in dividend. As to the second question, we are extremely happy if hydrogen will be boosted because all our plants -- the gas plants are all already compliant with the use of a 1% mixture. And that's at 0 cost. So our plants are ready. And our networks are ready, the urban networks are ready-to-use a mixture. Plants already started technical analysis, and so we know very well what we have to do to increase this percentage. To achieve 5%, we basically have to change the software. We don't have to change the hardware very much. And so the CapEx is in line with this effort that is not considerable. So I'm talking about a CapEx of a few million euros to achieve 5%. In order to achieve 18%, the effort is bigger and bigger in terms of investment. And in terms of plans, the CapEx in the order of tens of million euros, not just a few million euros. And so we already have an opportunity in our hand, should this sector of hydrogen mixture be boosted. So we are not an operator in the renewables, and therefore, we do not have plans to produce hydrogen because the production of hydrogen is not part of our plan as we are now involved in the renewable sector. So we still have the vision of the fact that in the short and medium term, there's no room for investment for renewables. The cost-benefit ratio of the investment in the renewables is too high because it would offset investments -- the investments that we mentioned today, investments that are more profitable, that we believe are more profitable and more in line with our group strategy. And as we have a multiservice model, and our main focus is not just decarbonization, but our main focus is circular economy. And therefore, we concentrate on it, and we concentrate the capital allocation on it. So we did not reconsider it or rather, we reconsidered it, but we achieved the same conclusion that we had in 2020. That is to say, we decided to focus and to boost a multicircular economy. And of course, the situation would have been different if Sorgenia business would have continued because in that case, we would have a different situation in the field of generation, and we would have a bit different long-term prospects.

Next question is from Enrico Bartoli, MainFirst.

I have a few questions. Water first. The acceleration of CapEx is mainly due to the investment in new treatment capacity for wastewater. For -- is this investment potential going to be exhausted within the 2025 business plan? Or do you consider it to be further expandable? Could you also give us more details about the evolution of the water-related process in the next years? Then, waste, have you considered the strategic importance of Unieco production, which opens up new perspectives in new areas of the country? Could you expand a bit more on the possible -- on the potential development outside your historical footprint? And then the target of power generation for you. Compared to the previous business plan, you expect a EUR 60 million increase in EBITDA. Could you give us some more details about the new investments and the reasons for this increase? And finally, about the strategic conditions, could you tell us about something about the management characteristics about power generation?

So thanks. Water first, water treatment, wastewater treatment is certainly one of the areas that absorbs the highest investments within the water cycle. There are more plans expected than in the previous plan. We are not to the end of it, but certainly, the exceptional efforts undertaken over the past 5 years. And considering the current standard, the best practices and market conditions, let's say, all these conditions will lead to a slight decrease after 2025, slight decrease. All in all, we do not expect major or meaningful changes. For the networks side and the water supply side, there may be future investment options. For instance, associated with more action to reduce leakages and also more actions or projects leading to the building and development of new catchment areas that may allow to improve security of supply sources in the future. So I would not expect great changes in terms of investment opportunity -- investment opportunities in the water business. Concessions. There are a few concessions, including the concession in general, which is quite a long-term contract, but there are also other concessions, Reggio Emilia and Piacenza for instance, that have already expired. And there is a new tender that has been launched for Reggio Emilia, the tender for Piacenza is due in a very short time. So we are confident that we may submit a well-structured bid, and we are positive about the chance to be awarded the concession or confirmed the concession also in the future. What about the opportunities that are coming from network business. They come more from the gas business than from the water business with new additional development options expected for the future. Waste business. Unieco opens up new horizons, new geographies, especially in the urban waste area. In Tuscany, there are a number of operations that are not consolidated. There is a new geography that is certainly quite meaningful to us. In particular, in the south of Tuscany, we have a number of opportunities. In that area, Unieco has quite a major presence with a lot of investments in companies that serve a high number of people, so quite a large population. This involves investments in the entire pipeline so for the waste cycle as a whole. So that's really big perspective for us. Unieco also allows the group to be more present in the special waste area. And in the medium term, this may be expected to be supported by the development of new plants, which would provide their best value in connection with the sales effort in that area. So this is really the move towards a more stable presence in that area. And then we have other plants. There is a plant that is being development in [indiscernible] and these may become quite interesting in the medium term. In, [indiscernible] for instance, the plant is devoted to organic waste treatment. And this is a good opportunity in view of the fact that the sector is very much fragmented. It is becoming more regulated. And this may be supportive of development and may speed up prospective opportunities, considering that the local authorities are now going towards concessions more and more. And finally, regarding mergers and acquisitions, we have no names to give you for the time being, but we are certainly working on that. I cannot give you names, of course, because it doesn't help. But consider CVA, for instance, which is a major hydro operator that combined with our hydro operations might lead to a self-standing industrial project, a well-balanced project from the point of view of governance that would allow to obtain good results in line with our overall strategy and consistently with our targets. So our M&A action must be seen in this perspective. We are not thinking of upstream acquisitions or of an upstream acquisition strategy. So this is the rationale. The increase in thermal generation. The repowering at Turbigo plant equals to EUR 30 million, EUR 35 million, including the capacity market component. And in 2022, the white certificate for the Torino, the plant will expire for approximately EUR 20 million, EUR 27 million -- EUR 25 million, EUR 27 million. So consider, first of all, the development of district heating 15 million cubic meters to the end of the plan. And there is then a mix of scenario opportunities and energy efficiency. So all these components sum up to the total figures that we have given you.