Earnings call transcript: ERG Q2 2025 sees strong quarterly growth despite challenges

ERG’s second quarter of 2025 earnings report revealed a notable increase in quarterly profits and strategic advancements, despite facing challenges from reduced wind power production. The company’s stock saw a 1.58% increase following the announcement, reflecting positive investor sentiment. According to InvestingPro data, ERG maintains impressive gross profit margins of 36.21% and has demonstrated consistent financial strength with a GOOD overall health score of 2.74.

Key Takeaways

• Q2 EBITDA increased by 11% year-over-year.
• Net profit for Q2 rose by 21% compared to the previous year.
• Completion of significant projects, including a battery storage plant in Sicily.
• Wind power production faced a decline due to extremely low wind speeds.
• Stock price increased by 1.58% following the earnings release.

Company Performance

ERG demonstrated resilience in the second quarter of 2025, achieving a Q2 EBITDA of 128 million euros, an 11% increase year-over-year. This growth was achieved despite a 3% year-over-year decline in first-half EBITDA, primarily due to reduced wind power production across Europe. The company remains a leader in the renewable energy sector, continuing to expand its portfolio and enhance operational efficiency.

Financial Highlights

• First half EBITDA: 274 million euros, down 3% year-over-year.
• Q2 EBITDA: 128 million euros, up 11% year-over-year.
• Adjusted net profit for the first half: 83 million euros, down 22% year-over-year.
• Q2 net profit: 34 million euros, up 21% year-over-year.
• Net financial position: 1,949 million euros, a 9% increase compared to 2024.

Market Reaction

Following the earnings announcement, ERG’s stock price rose by 1.58%, indicating a positive response from investors. This increase places the stock closer to its 52-week high of 25.42 euros, showcasing its strong performance within the annual range. Based on InvestingPro’s Fair Value analysis, ERG currently appears to be trading near its Fair Value. Get access to detailed valuation metrics and 12+ additional ProTips by subscribing to InvestingPro.

Outlook & Guidance

ERG maintains a confident outlook for the remainder of the year, projecting an EBITDA range of 540 to 660 million euros and a year-end net financial position between 1,850 and 1,950 million euros. The company expects a return to normal wind conditions, which should support its financial goals. With revenue growth of 8.96% over the last twelve months and positive analyst projections for profitability this year, ERG demonstrates strong momentum in its core business operations.

Executive Commentary

CEO Paulo Merli emphasized the importance of electrification, stating, "Electrification should come from heating, electric vehicles, and green hydrogen." He also highlighted a downward trend in capital expenditures per megawatt, underscoring the company’s focus on cost efficiency. Merli reassured investors of ERG’s commitment to growth under favorable conditions.

Risks and Challenges

• The significant drop in wind power production due to low wind speeds remains a concern.
• The reduction in investments compared to the previous year could impact future growth.
• Potential policy changes in the U.S. market pose uncertainties for expansion plans.
• The company’s ability to maintain financial discipline amid market expansion will be crucial.

Q&A

During the Q&A session, analysts questioned ERG’s participation in foreign exchange auctions and its exploration of battery storage opportunities. The company also addressed its hedging strategy, aiming to hedge 70% of 2026 production, with a target of 80%.

Full transcript - ERG (ERG) Q2 2025:

Conference Operator, Chorus Call: Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the ERG Second Quarter twenty twenty five Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.

At this time, I would like to turn the conference over to Mr. Paulo Merli, CEO of ERG. Please go ahead, sir.

Paulo Merli, CEO, ERG: Good afternoon, everyone, and welcome to our quarterly results presentation. Here with me, as usual, Michele, our CFO. So let’s get started with an overview of results over the period. I’m on Page four. First of all, let me put the results into context.

The first half of the year, including the second quarter, was characterized by much lower wind speed than last year and historical average. I’ll soon share the results of a historical wind analysis conducted by our experts. Against this backdrop, in the first half, our EBITDA closed at €274,000,000 slightly down minus 3% year on year. While looking at Q2, results got back to positive with EBITDA at €128,000,000 plus 11% year on year. There were two major effects behind this performance.

On one hand, this is true for the semester and for the second quarter. On one hand, the much weaker production on a like for like basis partially offset, this is the second factor, by the contribution from new installed capacity With the first repowering projects now up and running and the full contribution of The U. S. Asset portfolio, which I remind you is being consolidated as of 04/01/2024. Despite the higher prices on screens, all in all, the price effect on a year on year basis was just marginally positive as the lower production resulted in lower merchant volumes.

Investments amounted to €143,000,000 significantly down year on year. But I remind you that the reduction is mainly due to the fact that CapEx in the first half of last year included the acquisition of a wind and solar portfolio in U. S. A. And a smaller one in France.

Out of the total invested in first half this year, about 50% was again related to M and A, with the acquisition of Rock and Cross wind farm in The UK, and the remaining about 50% allocated to organic development, mainly greenfield and repowering in France, Germany, Italy and The UK. Bottom line, adjusted net profit in the first half was €83,000,000 down 22% year on year due to the already mentioned decline in EBITDA, higher depreciation and financial charges linked to new assets. But again, looking at Q2, earning direction returned positive with net profit at €34,000,000 plus up 21% year on year. Net financial position at June 3 was €1,949,000,000 plus 9% higher versus the 2024, discounting, also discounting, not just the investments, a total distribution, I mean, dividends and buyback of roughly €160,000,000 which basically fully justify the increase. Michele will provide more details on the cash flow over the period.

As mentioned, the I’m now commenting Page number five. As mentioned, the economic results of the period were significantly impacted by unfavorable wind conditions throughout Europe. The economic impact of lower volumes, I mean, on a like for like basis versus our budget and versus last year in the first half was in the order of €50,000,000 to €60,000,000 So I think it’s important for you to understand the magnitude of this event. The map above shows the usual map that we are posting on our web, the map shows the deviation of wind speed from the long from its long term average, say, in Europe, in this case, in Q2. Dark blue indicates the areas where the negative deviation is greatest.

It’s quite unusual to see a situation like this with weak wind virtually everywhere in the regions where we have installed capacity. I mean, everywhere, say, across Europe. This map in Q1, and you can find it in the last WACC’s presentation, was even worse. This prolonged wind route was caused by a persist high pressure system all over Europe. Please consider that production of a wind turbine moves proportionally to the wind speed with a multiplication factor of two to 2.5 times, which translated in simpler words means that if the wind speed drops by 5%, the production will drop by 10% to 12% on average.

According to national public data, these are data published by the National TSO, Wind power production during the period on a like for like basis decreased year on year by 17% in Italy, as shown in the chart. Those are the data published by TERNA. And I tell you, they are not here, but in France, same, minus 15%, minus 25% in Germany and minus 25% in Poland. Those, I repeat, are national data even though our own trends over the period were pretty similar. As said, we conducted an internal analysis to understand better, also in light of the magnitude of the event.

The graph below shows the average wind speed recorded over the first half of the last eighty five years in Europe, dating back to 1940. We were inspired by some public study issued by other independent institution to to do this analysis. Result confirmed that this semester, twenty five first half, was extraordinarily weak. We repeated the analysis in every European country where we operate, and the result was very similar. In each country, the wind route over the period was among the worst ever recorded.

Not the worst, but a month. Then in Europe, as an aggregate that is shown here in the chart, is the low is the lower because this phenomenon was all over all over Europe. So this analysis led us to a couple of conclusions, very simple. First, wind speeds have always been erratic, and historical data show that this type of wind installed wind capacity, but this event was always there. So difficult to say there is a clear trend related to climate change.

These are the same conclusions other independent third party analysis came to and among the institutions that said that I would include also the international energy audits. The second consideration is that in this specific case, geographic diversification across Europe proved less effective because, as I already said, the wind route was well distributed all over the continent. The good news is that over the last couple of months, wind speed have gone back to normal. And this make us confident about our full year guidance, which I anticipate will be confirmed. I move to Page six.

Say, over the period, we continued to delivery on our strategy. We are very pleased with the completion of our first battery storage plant in Biquiri, Sicily, 13 megawatts, as flexibility is becoming increasingly important. We also completed construction of the Korlaki wind farm in Northern Ireland. The 47 megawatt plant is now operational and in its ramp up phase, and we expect it to reach its full potential over the next few months. We are also advancing our project pipeline with 50 megawatts of greenfield and repowering projects in France, Germany, Italy fully authorized.

I’m also very pleased to say that we, this morning, signed a long term PPA, payers produced with A2A, which will cover about 90% of the expected production from the Castelbe Trano Salami wind farm in Sicily again, are a powering project that has been operational since December. The PPA will be effective as of 01/01/2027, and will substitute the CFD tariff that was awarded in auction held a couple of years ago under the Fair twenty nineteen Decree. In addition to that, we have been awarded the largest part of the first auction launched by FS Group, which is the state owned railways company. This through three different PPA with an aggregate amount of about one hundred one hundred and eighty gigawatt hour per year with a tenure of five to ten years. This is an extremely important achievement as it refers to existing wind projects already out of the incentive scheme.

Overall, in the first half, we proved once again successful in securing at attractive condition both new capacity and existing one, leveraging on our expertise in the PPA market. Regarding ESG, we have once again confirmed our position among the top tier companies in all aspects of our sustainability strategy. We ranked first in the Identity Corporate Index. We were confirmed on the CDP A list and renewed our gender equality certification in Italy, clearly recognizing our strong commitment to the topic. Now to Michele for his review of results in more details.

Michele, CFO, ERG: Thank you, Paolo. In second quarter, power market prices have been slightly higher than second quarter twenty twenty four across all countries where ERG operates. However, as you know, this trend had only limited effect on our all in unit revenues due to the closely regulated nature of our business model. In Italy, the wind unit revenues stood at EUR 120 megawatt hour, in line with the second quarter twenty twenty four. Despite the increase of the green incentive value rising to EUR 50 five megawatt hour against EUR 42 megawatt hour and the higher power market price, overall, the unit revenues remained stable.

This was mainly due to short term hedging strategies executed at lower prices compared to the previous year. In France, the increase in unit revenues was driven by higher short term hedging prices, combined with a more favorable market environment captured by a few merchant assets. In Germany, capture price in second quarter are aligned to second quarter twenty twenty four at €94 per ton. In Poland, revenues increased during the second quarter, primarily driven by the short term hedging. In UK, the capture price is around €74 megawatt hour, higher than second quarter twenty twenty four, thanks to higher short term management.

Note that this figure, as usual, does not include revenues from balancing services. As for solar all in unit revenues, we recorded a decrease in second quarter in Italy, mainly due to lower hedging prices. In Spain, capture prices were impacted by the current market environment with a significant profile effect during daylight hours. In France, revenues are sold at FIT prices compared against the ’24 when the energy produced by assets acquired in 2047 was sold at merchant prices. Energy plants in United States have unitary revenues that reflects the PPA prices, so very stable.

Now focus on production.

Paulo Merli, CEO, ERG: In the

Michele, CFO, ERG: 2024, the group’s overall production was in line with previous year. This stability was mainly driven by perimeter effects, which offset the persistently low wind conditions across Europe. In Italy, we have six fifty four gigawatt hour, plus 2%, mainly due to perimeter effect coming from repower than the ramp up assets, both in wind and solar, offset by low wind. In France, 266 gigawatt hour. Thanks to new benefit asset entering operation during 2024 and the 2025.

And the solar plant plant acquired in 2024, again, set by low wind condition. In Germany, 170 kilowatt tower, minus 6% due to lower wind condition. In UK and Nordics, 137 gigawatt hour in line with last year, mainly thanks to the new asset acquired in January and Scotland, partially offset by low windiness in UK. In Spain, 149 gigawatt hour due to lower radiation, minus 11%. In USA, 248 gigawatt hour, minus 6% due to lower wind conditions.

Eastern Europe was the only region where we recorded improved wind conditions with producing production reaching 160 gigawatt hour, up 15% year on year. In the first half, the production has been 3.7 terawatt hour, aligned with 2024, mainly due to perimeter effect 0.6 terawatt hour, of which 0.3 terawatt hour

Paulo Merli, CEO, ERG: in

Michele, CFO, ERG: USA, partially offset by extremely low end condition in Europe. Please note that we began to consolidate U. S. Asset in the 2024. In the second quarter of the year, EBITDA reached EUR 128,000,000, EUR 12,000,000 more than second quarter twenty twenty four.

This growth was mainly due to perimeter effect, 9,000,000, linked to the newly acquired asset and organic development as well as higher capture prices. These positive drivers were partially offset by the already mentioned weak wind conditions across Europe. In Italy, EBITDA reached EUR 85,000,000, an increase of 5,000,000 year on year, primarily driven by new investment in both wind and solar. This was partially offset by unfavorable wind conditions and lower capture price on Solas. In France, EBITDA is EUR 5,000,000 higher than last year, supported by higher capture price in wind asset and perimeter growth, partially offset by low wind availability again.

In Germany, EBITDA is 5,000,000, 2,000,000 lower than previous year mainly due to persistently weak wind conditions. In Eastern Europe, EBITDA is 11,000,000, million higher than previous year, mainly driven by higher wind resource. UK Nordics EBITDA is EUR 7,000,000, up to 2,000,000, thanks to the contribution of the new acquired asset in Scotland. In Spain, EBITDA is EUR 2,000,000, lower than last year, impacted by reduced production and lower capture price. This was due to both intraday profile effects and short term hedging at less favorable price levels compared to previous year.

In USA, the EBITDA is $10,000,000 $2,000,000 lower than previous year due to lower production in the quarter. In first half twenty twenty five, EBITDA is $274,000,000 lower than previous year by $7,000,000 mainly driven by the persistent low wind condition in Europe, partially offset by perimeter effect. The second quarter allow us to partially recover the underperformance of the first quarter, equally affected by poor maintenance across Europe. Let’s comment now on investment. In the second quarter, we invest EUR 28,000,000, mainly due to ongoing construction in UK, France and Italy.

In particular, we spent organic capital for EUR 10,000,000 in UK, mainly for the construction of the Corvaki wind farm, 47 megawatt, 12,000,000 in Italy refer particular to our first storage project and some revamping and repowering activities. And EUR 4,000,000 for the beginning of our first repowering project in France. Second quarter include the second quarter twenty twenty four includes $235,000,000 for the acquisition in U. S. In the first half twenty twenty five, investments amount to EUR 143,000,000, of which EUR 72,000,000 of acquisition in U.

K. Versus EUR $444,000,000 of first half twenty twenty four, which includes the acquisition in France and U. S. For a total amount of EUR $319,000,000. Let’s now move on to the financial, commenting on the other item of the profit and loss.

In the second quarter, amortization depreciation is EUR 69,000,000, in line with second quarter twenty twenty four. Net financial charges are €12,000,000 versus €7,000,000 in second quarter last year. Financial charges versus banks and bondholders net of repeated remuneration stand at €8,000,000.4000000 up in comparison with last year due to the remainder effect and lower remuneration on cash. The complement to EUR 12,000,004 million are noncash accounting items such as effects coming from tax equity partnership in U. S.

Or figurative lease interest expenses according to IFRS 16. Tax rate in the quarter is 26, lower than 30% of last year due to different contribution of Arikkantis to taxable result. The adjusted net profit of the quarter amounts to EUR 34,000,000 higher than last year, 28,000,000, mainly driven by the recommenced EBITDA, partially compensated by higher financial charges. The adjusted net profit for the first half amounts to 83,000,000. Finally, let’s take a look at the cash flow statement and net financial position.

The net financial debt at the end of the first half is EUR 1,900,000,000.0, 200,000,000.0 higher than the 2024, mainly driven by the dividend payments and the reinvestment of the period, partially netted by the cash generation from EBITDA. The net working capital is affected by dynamics due to payable for investments. Thank you for your time. Now I leave the floor to Paolo for his final comments.

Paulo Merli, CEO, ERG: Thank you, Michele. Now let’s see our guidance for the full year. As you know, the EBITDA guidance given during the last webcast already took into account the low winds since April. Unfortunately, this trend continue, although to a lesser extent in May. June was almost near budget, while July is doing well.

So it seems that some sort of return to normality is taking place. When assuming windiness in line with historical average from now on, we are still confident that we can approach the midpoint of the guidance range. To reach the upper part of the range, however, we would need windiness above the historical average, then assuming a recovery or at least a partial recovery in the second half of the of what we have lost in the first. With this caveat, we confirm our EBITDA guidance within a range of five forty million euros $660,000,000 sorry, $540,000,000, 600,000,000. CapEx is also confirmed within the range of 190,000,000 to €140,000,000 as well as net financial position at year end within the range of €1,850,000,000 to $1,950,000,000 So thank you for listening, and we are now ready to take your questions.

Conference Operator, Chorus Call: Thank you, sir. This is the Chorus Call conference operator. We will now begin the question and answer The first question comes from Enrico Bartoli of Mediobanca.

Enrico Bartoli, Analyst, Mediobanca: Hi, good afternoon. Thanks for taking my question. Actually, I have three. The first one is related to the ForEx auctions that are expected to be held shortly. If you can share with us your response for the and, let’s say, the amount of capacity that you are planning participate to the tenders?

And some comments is possible on the level of competition that you expect from the first auction. The second question is related to The U. S. There were several changes in the regulation recently. If you can share with us, let’s say, your view on the potential for ERG in this market and, let’s say, the possibility to access the one gigawatt pipeline that you have in the country?

And the third one is related to battery storage. You highlighted that actually you had the first battery storage in operation in the past quarter. I’m wondering, let’s say, if you think that even, let’s say, there could be an acceleration in the investments by ERG in this technology, if I remember where you had 0.6 gigawatts pipeline in March? And if you are planning to participate to the MAX auctions and maybe some comment on the level of profitability that you think can be achieved in the Italian market. Sorry for the many questions.

Paulo Merli, CEO, ERG: Thank you. Thank you, Rick. So for IX, yes, sure. We have few projects that are going to take part with the auction. In all in all, we think roughly 130 or a little bit more 130 megawatts, so a little bit more than that.

Most of them, basically, 5%, wind and repowering projects.

Michele, CFO, ERG: We

Paulo Merli, CEO, ERG: expect a fierce competition because based on the manifestation of interest, there are 2.9 gigawatt of wind capacity that is going to take part of the auction and 17 to the PV auction, even though we are more focused now on wind. Of course, the price at which we are going to bid is very confidential. The auction is already open and is gonna close. So the last day it’s possible to submit bids is on the September 12. And the outcome of the results should be published by GSE within November December.

December. December. So let’s see how it’s going. But I think even today with the PPA signed with the eight way, there is a clear knowledge and capacity of the company to find other route to markets. So we are confident that either through CFD awarded two options or PPA will be able to carry on our project.

We would have liked to bring more capacity to the Forex, but fortunately, we are in Italy and we have some authorities at Sione Unica on some projects, for instance, in Sardinia that are struggling to find the right framework implemented because of the hostile behavior, say, of the region that has issued the authorization in Munich for our Nullvi Plouage

Speaker 4: and the

Paulo Merli, CEO, ERG: the

Speaker 4: S.

Paulo Merli, CEO, ERG: And precedent that makes basically the project, say, not feasible. You know that we have been fighting on these projects for the last six, seven years because we submitted the first documents for permitting in 2018. And make the story short, but true ups and downs. The project was authorized in 2022 by the Prime Minister, Mario Draghi, to say find an equilibrium between the different opinion of different institutions around the project.

The decision was appealed by the Sardinia region and say avoiding to say what is in between. The last move was the administrative court that ruled in our favor, forcing the region to issue the permit. And if not, the prefecta would have been would have issued the permit on behalf of the region. The region yesterday issued the authorization on the Unica, but as I said, full of tricks and preconditions. So the most likely scenario we want to go through it, but is that we are going to appeal or challenge this to the Supreme Court.

And we are absolutely confident that we are on the right part of the reality. And we are quite confident that this Authorization Neunica was issued, say, intentionally to be challenged in order to prevent the prefecta to issue the authorization aunica that in that case would have been for sure clean and not subject to all these conditions. So we are really, say, annoyed by this situation, but we keep going on because we are confident that in the end, rights and interests will be safeguarded by the appropriate authorities. But for the time being, this project that we thought it was going to take part to the auction, we decided to not because before we have to make clear the situation around it. It’s not just a business case.

It’s more it’s becoming a matter of principle now. Okay. So the first question was this in USA, yes, the regulation is evolving. Mr. Trump, the President is quite clear that is a little bit against the development of renewables.

In particular, there is an executive order or a law that is envisaging the phase out, let’s say, of the tax equity schemes in a couple of years. But say, based on our business model and based on our approach to the country, we don’t expect direct consequences on us. I mean, we do not expect any retroactive actions. So the portfolio we are running now is not going to be affected by this new regulation. For sure, this new regulation would make harder for developers to install new capacity, authorize new capacity.

But still, that our model is to buy assets on a totally derisked framework. I mean, when they have already the PPA, when they have already the code, the commercial operation date and in case there is no tax equity schemes, we would price this new layout in the project. So we do not expect any particular direct consequence. For sure, even for us, it would be tougher to grow. But we are also in this moment, in these days, we are elaborating some offers to submit to our partner, Appeks, because this was part of the agreement.

Let’s see if we can find, say, an agreement, but the targets we set out for our business plan remains the same. The best, yes, we are very happy and satisfied that we put in operation our first storage system, megawatts in Vicarage, Sicily, nearby our wind farm. It’s also an occasion for us to learn how to manage this kind of asset. And there it’s intercorrelation with the wind assets. And we are working very hard to carry on our pipeline of vessel, I would say more.

We are trying to switch some solar projects into battery storage project. This is true for in Spain, for sure, but also in Italy because flexibility, we think, is going to be a game changer in the market. We see every day the dark curve in the twenty four hours price profile that is very much influenced by the penetration of solar plants that are producing just on a daily hour. So battery storage, we are quite sure that is a stream that is going to be under stronger growth for the years to come. So I hope to have answered your questions, Rico.

Enrico Bartoli, Analyst, Mediobanca: Yes. Just a comment on, let’s say, the participation to the market and what you think that the profitability could be in that auctions.

Paulo Merli, CEO, ERG: But yesterday, they published the new number for the MAX. Set out EUR 7,000 per megawatt hour, which is a little bit higher than what we were expecting. So we see we look at it, I mean, at MAX with high interest. We have not that much capacity to with which to participate in this auction, but some just more projects. I’m talking about some tens of megawatts and not more than that.

But we are trying to explore also on the secondary market if there are projects buy, I mean, in terms of permitting that are eligible to participate to the auction. Let us work and we need a couple of months to understand better what we can do in this auction. But looking forward, for sure, but there is a new stream of revenues, a new stream stream of business.

Enrico Bartoli, Analyst, Mediobanca: Perfect. Thank you very much.

Paulo Merli, CEO, ERG: You’re welcome.

Conference Operator, Chorus Call: The next question is from Emmanuel Oggione of Kepler Cheuvreux.

Emmanuel Oggione, Analyst, Kepler Cheuvreux: Good afternoon and thank you for taking my question as well. I have the first one on the hedging policy for 2026. If you can update on next year because basically, this year is already fully hedged. The second question is a appreciation, but basically you have already answered before about the recently today signed PPAs with A2A and in general, your policy based on your previous statement also, the when you sign a PPA in Italy, basically, this means that the level of power price agreed, it’s not disclosed there, I will not ask for. Is so the level of the PPA, the power price of PPA is higher than what you expect from other auctions or other level of profitability you expected, for example, for the next auction, etcetera?

So I could confirm this. And finally, have a question on share buyback. If you I know you have a dividend policy and attached also an additional share buyback plan, but I wonder if considering the depressed level, depressed valuation, could be a right time to think about an increase in this share buyback plan? Thank you.

Michele, CFO, ERG: Okay. Regarding hedging, are we carrying at a level of 70% of our hedging for 2026. So we are building up our short term hedging position in order to begin the New Year, so 2026, with the planned level in the region of 80%. So we are progressing following our usual policy also on short short term term hedging. For sure, we’re taking account also the the long term hedging that we have just closed with sort of the start on the to take this in consideration in for our hedging percentage.

So overall, the target is to reach by the end of the year roughly 80%.

Paulo Merli, CEO, ERG: Okay. Vasi, can you just elaborate a little bit more on your second question on top of what Mikaela just said? Yes, we’re quite happy about the PPA with eight way and also the PPA the three PPAs we have been awarded through an auction system with Grupo Ferrovia de los Tato, the the the railway corporate. This is particularly interest interesting for us because basically, it’s covering production coming from old assets, so assets that they have already phased out from an incentive scheme and then make their business case more sustainable for the long term. And we think this kind of market is going to develop quite substantially going forward.

And even the government in the last, I don’t know how to say, decree was envisaging the Article III, the possibility for GSE to launch tender for long term contract between private offtakers and producers. So we think that decoupling, the so called decoupling between day ahead market and long term mechanisms will develop along this way. The share buyback, I can just say that the last general meeting ruled for 10% share by so optionality to buy back share own shares up to 10% of the capital. But this the Libra should translate when and if the liberal of our Board of Directors that so far has not decided anything about this. By the end of the year, we will make a point on this.

I can say sorry, just to touch a point you raised in your previous question about PPA. Of course, I can say the price. I confirm that we are talking about the fixed price on a pay as produced formula, say, for the eight way contract and the other one is more base load, but still we can provide this energy coming from the power portfolio. But about the price, don’t forget the Castelvetrano Salemi was already awarded a tariff of EUR 64 per megawatt hour. So it’s easy to understand that the pricing should be better than that.

But if not, there was no point in signing this contract.

Emmanuel Oggione, Analyst, Kepler Cheuvreux: Thank you. Very clear. If I may, a follow-up on the hedging as regards the pricing. The moving averages, I think the rolling moving average of the hedging, I think, has improved for ’26, considering the year to date higher power prices at least higher than expected for me?

Michele, CFO, ERG: Yes, you’re right. There a mild increase, but consider that we build up the position week by week. So we tend to follow the price that the progress of the price during the month. So you don’t have to take the ample position today to consider our level of hedging for 2026.

Emmanuel Oggione, Analyst, Kepler Cheuvreux: Thank you.

Conference Operator, Chorus Call: The next question is from Roberto Letizia of Equita.

Roberto Letizia, Analyst, Equita: Yes, good evening. Thanks a lot for taking my question. The first question is a follow-up on The U. S. Market.

Just wondering if without taking into consideration incentives, so just looking at market conditions and also taking into consideration the new trends of demands based on data centers, If any way market condition justify buildup of plants out of your pipeline so that you cannot be worried about local policies and just look into the market conditions through PPAs as normal merchant positions? Just wondering if the market is envisaging and is supporting this optionality. The second question is more strategic. I was wondering what would you consider as the right market conditions in order to go back to a different growth rate path, so being less focused on the balance sheet and maybe use it a bit more to follow additional option ideas that may arrive, which may be the best as well or different technologies or different countries that offer growth opportunities? So if you can tell us what would be the best market condition for you to expand the balance sheet and pursue a higher growth rate?

Thanks a lot.

Paulo Merli, CEO, ERG: Okay. About U. S, it’s very difficult to say how the market will pan out given the changes that are now undergoing there. But honestly, I have to say that when looking the projects, I mean, when we are making the our due diligence exercise, We have noticed that most of the project struggle to have a fair value that is in line with the CapEx the developers have spent to bring the asset into operation because the IRA, honestly, with all these tax benefits and so on paid upfront, it’s like our super bonus, 110. I mean I think you know what I mean.

This has created a big inflation. Sometimes when comparing the CapEx per megawatt, both for solar and wind in U. S. Versus Europe, you see that there in U. S, I mean, this ratio is much, much higher than in Europe.

So of course, if the all these fiscal benefits will be eliminated or will progressively phase out, for sure, The U. S. Market would need to rebalancing, I mean, in terms of CapEx per megawatt and so on. So difficult to say, but we are in a I don’t want to be to appear too optimistic, but we are in a kind of safe haven because we are not obliged to buy. And for sure, the only point I believe is not moving is our financial discipline.

So we want to grow there. We still believe it’s a great market because consumptions and the economy is very hot there, but still at the right condition. And that leads me to your last questions, which are the right market conditions. So the thing that is worrying me the most is the missing electrification of consumptions. So I mean, in Europe, but all around the world, we are keep installing renewable capacity, but we are not seeing the same growth in terms of electricity demand.

So I think we need to push on electrification. This is very important. And so far, we haven’t seen sign and the right commitment also of the European Commission towards this point. So till there, there is no there are no other condition to accelerate on the deployment of investments. When there is a turning point on this and sooner or later, it will happen, I’m sure, because the decarbonization is an unstoppable process.

But speed and the speed is an important point. Whenever we have a sign, a clear sign that this trend is changing, we can consider acceleration.

Roberto Letizia, Analyst, Equita: Very clear. Thanks a lot for your help.

Paulo Merli, CEO, ERG: Thank you.

Conference Operator, Chorus Call: The next question, sir, is from Alex Ronsier of Bank of America.

Alex Ronsier, Analyst, Bank of America: Hi. Thanks for taking my question. I just had one simple one, if I may, was regarding wind speed condition in July. I think on some of the data that I can get, it looks like wind condition are actually quite good and actually much better than historical average. I know your guidance is kind of at normal condition for the rest of the year.

But have you seen similar better wind condition trends as of July? Or is that just you think a little bit of a data phasing or perhaps sporadic data point? Thank you.

Paulo Merli, CEO, ERG: So I confirm that over the last couple of weeks, wind is strong, particularly in Italy. And you know that Italy is very important for us because here prices are higher and also a portion of our production are still getting the green certificates, say, let me call it like this, But also in France and in Germany, UK, and even Sweden, we are now seeing better conditions. Seems like we are getting back to normal, I mean, in terms of wind speed. It’s very difficult. And we conducted an internal analysis, which is much more, say, in-depth of the executive summary that we have shown through this webcast.

And basically, the analysis confirms that this kind of volatility in wind presence has always been there. In Italy, we had a wind drought like the current one in the ’80s, in Germany in the ’60s. So back in time, that means probably that climate change is not the main driver behind it. This is also the outcome of other institution that said that there is it’s impossible to find a clear and straightforward link between climate change and the wind and the wind speed. In fact, not ten years ago, but one year ago, in the first four months of 2024, wind was exceptional, exceptionally good.

So the other way. So I hope that we have answered your question.

Alex Ronsier, Analyst, Bank of America: That’s all good. Thank you. Thank you.

Conference Operator, Chorus Call: The next question is from David Candela of Intesa Sanpaolo.

David Candela, Analyst, Intesa Sanpaolo: Hi, good afternoon, everyone. Thanks for the presentation and for taking my question. The first one is a follow-up on the answer you gave on the demand side and on the electrification. I was wondering if you can broaden your answer, sharing your view about what is preventing electrification in your view to build up. Actually, is the fact that the prices are high, so they are preventing for more consumption or there are energy efficiency that is going the opposite way.

Just your view on that will be helpful. And second question with regards to M and A, it looks like to me that the market is unanswered a little bit or at least the wind in between the buy and sell side have approached, so the parties have approached. Are you seeing that sort of evolution in the market? And if that’s so, if you are willing or considering some little opportunities in Europe and just for that one update to build up growth? Thank you.

Paulo Merli, CEO, ERG: Okay. So about the electrification of consumption, say the streams the electrification should come from are the heating and cooling, air conditioning through pump heat pumps instead of gas boilers. So a switch that would allow a switch from gas to electricity. Electric vehicles and data center, that is the only stream is going well. Green hydrogen produced green means that hydrogen is produced through an electrolysis process supplied by green energy, renewable energy.

So all these streams are not growing at the speed needed to support the electrification of consumption as initially expected by the European Commission. Now the European Commission has allocated €100,000,000,000 to sustain the electrification of consumption. You asked for my view. My view is it’s not enough because €100,000,000,000 for 27 countries that are part of the union in the end is peanuts, let me use this term, compared to the EUR 700,000,000,000. They want to invest in military services for the $300,000,000,000 Ursula on the line committed to Mr.

Trump to for buying gas from U. S. So with the I think we must do more, but I’m sure that sooner or later will happen because if not, the industry will slow down very, very significantly. And then the market will become more a biased market. To come to your last question, yes, the M and A will become easier than it’s now.

For the time being, the market, the private market, the secondary market is still tight. Supply and demand are not matching in the sense that the expectation of sellers are still very high, while the buyers are a little bit more cautious in allocating certain value. So the m and a transactions, I’m not saying it’s not my opinion. There are public data showing these are quite slowing down quite considerably. But this could be an opportunity for us that we have a strong balance sheet.

As soon as sooner or later, we are we keep scouting the market. And even in these days, we have submitted several nonbinding offers to see if there are good opportunity for us. Let’s see. So M and A, for sure, has always been a tool a successful tool through which company created value and we still believe it’s the case.

David Candela, Analyst, Intesa Sanpaolo: Thank you.

Paulo Merli, CEO, ERG: You’re welcome.

Conference Operator, Chorus Call: The next question is from Francesco Sala of Banco Acros.

Emmanuel Oggione, Analyst, Kepler Cheuvreux: Yes, good afternoon. Thank you for the presentation and for taking my questions. What have you seen in the last few weeks or months in terms of wind turbines and solar panel costs and more in general construction costs? And secondly, I wonder whether you have seen in particular some disruptions or bottlenecks from China also in the light of the Chinese government push to reduce capacity? Thank you.

Paulo Merli, CEO, ERG: I’d say maybe and I’ll let Michele to elaborate more because he’s in charge of procurement for the group. But I’m happy to say that over the last months, we are seeing for the first time a change in direction in the CapEx trend for wind. So European OEMs are becoming more aggressive now because they won’t place orders and they want to prevent Chinese competition to prevail on the market. So they want to avoid what already happened in the solar field. So for both technology, but for solar was more expected, say, are seeing a downward trend in the CapEx line.

I mean the CapEx per megawatt, KLE is more precise on that.

Michele, CFO, ERG: Yes. In addition, I would add that we don’t see any particular disruption on the supply, in particular for wind, that is our core technology. Regarding wind technology, you know that we are always counting also alternative to traditional Western suppliers. So we are open and we consider also alternative supplier. The key point that we look at this opportunity on from an industrial standpoint, so we don’t value just the CapEx cost at the beginning, but also the production in the long term, the efficiency of the wind turbine in the long term, and we put all the element in our evaluation.

And so on a case by case, we try to find the right technology for each specific wind project Because every wind project is different to another in term of characteristic of the size, characteristic of the wind, permitting constraints and so on. So we consider all the technologies and said by Paulo, we are seeing some improvement in the scenario in the last month because the competition is increasing in the market. And from our standpoint, this is a positive element.

Emmanuel Oggione, Analyst, Kepler Cheuvreux: You.

Conference Operator, Chorus Call: Gentlemen, at this time, there are no more questions registered. So

Paulo Merli, CEO, ERG: thank you all for listening, and I wish you a super summer. See you in October or November. November.

Conference Operator, Chorus Call: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.

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