• Revenue: Lower revenues compared to the same period last year due to commodity dynamics.
• EBITDA: Increased by 46%, reaching a high level with significant growth in ordinary EBITDA.
• Group Net Income: Grew by 75%, with ordinary group net income increasing by 86%.
• CapEx: Increased by 31% in the electricity network, with a focus on development and smart infrastructures.
• Renewable Energy Generation: 61% renewable energy generation, with a 27% increase.
• Installed Capacity: Increased from 1.7 to 2.7 gigawatts.
• Customer Base: Grew by 42,000 units, with electricity and gas sales increasing by 6% and 7%, respectively.
• Net Financial Position: Stable, with a leverage of 1.7 excluding the hybrid bond issuance.
• Guidance: Increased to about EUR2.2 billion for EBITDA, with net ordinary income ranging between EUR700 million and EUR720 million.

• Warning! GuruFocus has detected 7 Warning Signs with FRA:EAM.

Release Date: July 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• A2A SpA (FRA:EAM) reported a significant increase in EBITDA, growing by 46% compared to the previous year, driven by strong performance in generation and market sectors.
• The company achieved a 61% renewable energy generation, with a notable increase in hydroelectric power, contributing to a 41% reduction in CO2 emissions per kilowatt hour.
• A2A SpA (FRA:EAM) successfully issued its first hybrid bond, enhancing its financial stability and supporting its sustainable finance framework.
• The company has increased its CapEx in electricity networks by 31%, highlighting its commitment to infrastructure development and future growth.
• A2A SpA (FRA:EAM) improved its guidance for the year, expecting an EBITDA of about EUR2.2 billion, reflecting confidence in its operational and financial performance.

Negative Points

• Thermoelectric production faced challenges, with a decrease in performance, partially offsetting gains from renewable energy sources.
• The waste management sector showed a flat performance compared to the previous year, with a slight decrease in collection revenues.
• The company anticipates a slight increase in working capital in the second half of the year due to seasonality, which may impact cash flow.
• There are concerns about the future profitability of auctions and capacity markets, with potential impacts from new storage capacities.
• A2A SpA (FRA:EAM) faces challenges in the Italian renewable energy sector, including regulatory and community opposition, which could affect future projects.

Q & A Highlights

Q: What is a reasonable assumption for hydraulic or water production in 2024 and 2025, and what are the expected price levels? A: For 2024, we estimate around EUR4.8, with a cautious forecast of EUR4 for 2025. The hedging for 2024 is at 59% with an average price of EUR151, and for 2025, it's 40% at EUR120. We expect DSM market contributions to close at around EUR80 million to EUR85 million for 2024.

Q: Can you provide guidance on the change in working capital and the auction for the capacity market of 2025? A: We expect working capital to be slightly higher in the second half due to seasonality, aiming for a leverage of 2.6 to 2.7 times. For the capacity market, we anticipate maintaining current price levels, with the Monfalcone plant expected to generate EUR10 million EBIT per month from mid-2026.

Q: Regarding the transaction with Ascopiave, are there plans for further financial actions, and what is the expected impact on RAB? A: The Ascopiave transaction aligns with our strategy to focus on electricity generation and distribution. We are considering additional options to improve our financial position, but we do not plan to touch A5 due to its complexity. The transaction and hybrid bond issuance provide confidence in closing the year without financial strain.

Q: What are the expectations for the 2025 market and generation performance, and how will retention costs impact EBITDA? A: In 2025, we expect a net increase in retail EBITDA due to the end of retention campaigns. Generation may decrease due to lower hedging prices, but the capacity market will offset this with EUR80 million more than initially assumed for 2024.

Q: What is the outlook for hydroelectric energy tenders and auctions, and how might government actions impact this? A: We do not expect Iren's approach to be a model for future tenders. We are addressing the issue at a national level, hoping for EU and government discussions to lead to alternative processes that favor current players in exchange for investments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.