Earnings call transcript: ERG Q4 2024 reveals revenue miss, stock drops

ERG, a prominent player in the renewable energy sector, reported its fourth-quarter 2024 earnings on March 11, 2025. The company disclosed a significant shortfall in revenue compared to market expectations, leading to a notable decline in its stock price. According to InvestingPro analysis, ERG is currently trading below its Fair Value, with impressive gross profit margins of 36.2%. Despite strong operational performance and strategic initiatives, the market reacted negatively to the earnings miss.

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Key Takeaways

• ERG’s revenue for Q4 2024 was €218 million, falling short of the €271 million forecast.
• The company’s stock price dropped by 6.16% following the earnings announcement.
• ERG invested €553 million in 2024, a 13% increase year-on-year, indicating a focus on growth and expansion.
• The company entered the US market and expanded its capacity significantly with new projects.
• ERG is targeting over €600 million in EBITDA by 2026.

Company Performance

ERG maintained stable EBITDA for the full year 2024 at €535 million, consistent with the previous year. The adjusted net profit declined by 22% year-on-year to €175 million, though InvestingPro data shows a healthy free cash flow yield and strong current ratio of 3.08x. The company invested heavily in growth, increasing its investment by 13% to €553 million. ERG’s strategic entry into the US market and expansion of its installed capacity to 3.9 gigawatts underscore its commitment to long-term growth.

Financial Highlights

• Revenue: €218 million, missing the forecast of €271 million.
• EBITDA: €535 million, stable year-on-year.
• Adjusted Net Profit: €175 million, down 22% year-on-year.
• Investment: €553 million, a 13% increase from the previous year.

Earnings vs. Forecast

ERG reported revenue of €218 million for Q4 2024, significantly below the forecasted €271 million. This represents a miss of approximately 19.6%, which is substantial compared to previous quarters. The revenue shortfall was a key factor in the negative market reaction.

Market Reaction

Following the earnings announcement, ERG’s stock price fell by 6.16%, closing at €18.51. This decline places the stock closer to its 52-week low, with InvestingPro data showing the stock has taken a significant hit over the last six months. Despite current market pessimism, the company maintains a 27-year track record of consistent dividend payments, demonstrating long-term financial stability. The broader market trends in the renewable energy sector have been mixed, with ERG’s performance indicating specific challenges faced by the company.

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Outlook & Guidance

ERG provided an EBITDA guidance of €540-600 million for 2025, with capital expenditures projected at €140-190 million. The company is targeting an EBITDA of over €600 million by 2026, highlighting its focus on strategic growth and operational efficiency. ERG remains committed to maintaining an investment-grade rating and is implementing a flexible shareholder remuneration strategy.

Executive Commentary

CEO Paolo Merli emphasized ERG’s strategic approach, stating, "We are enforcing our value over volume approach." He also highlighted the company’s commitment to sustainability, noting, "ESG is naturally embedded in our business model." Merli expressed caution regarding market conditions, saying, "We prefer to be cautious and assuming the P50 wind assumptions."

Risks and Challenges

• Wind Drought: ERG faces challenges from an unprecedented wind drought across Europe, impacting production.
• Regulatory Environment: While there are improvements, ERG is waiting for clear storage frameworks in the EU.
• Market Volatility: The renewable energy sector is subject to fluctuations, affecting revenue and profitability.
• Competitive Landscape: Maintaining a competitive edge in a rapidly evolving market remains a challenge.
• US Market Entry: Cautious approach needed as ERG explores opportunities in the US.

Q&A

During the earnings call, analysts inquired about ERG’s value creation targets and potential for increased share buybacks. The company clarified its target of achieving 200+ basis points over the weighted average cost of capital (WACC) and expressed a cautious approach to the US market. Additionally, ERG is exploring battery storage opportunities and considering asset rotation in tier-two countries.

Full transcript - ERG (ERG) Q4 2024:

Conference Operator, Coruscant: afternoon. This is the Coruscult Conference Operator. Welcome and thank you for joining the Erg Full Year twenty twenty four Results Strategy Update 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. Paolo Merli, CEO of ERG. Please go ahead, sir.

Paolo Merli, CEO, ERG: Good afternoon, everybody, and welcome to our webcast. The objective today is to review 24 results and achievements while providing you with a strategic update on our business plan and targets. Here with me, as usual, Michele, our CFO. Let’s get started with an overview of 24 results. I’m on Page five.

The business environment over the last quarter, in particular, was characterized by wind availability that was well below the normal average across Europe and particularly in the quarter. Here, I’ll focus on full year results, then Michele will provide more details about Q4. EBITDA closed at €535,000,000 basically in line with last year and close to the midpoint of the guidance range. The two major effects behind this performance were on the one hand, the weaker production recorded during the period on a like for like basis. And on the other hand, the contribution coming from the new installed capacity, mainly The U.

S. Portfolio and the additional capacity in Europe, including our repowering projects in Italy. The two effects had more or less the same economic magnitude, one negative and one positive. So they offset each other making the 24 annual EBITDA basically in line year on year, as simple as that. We invested significantly over the period €553,000,000 13 percent up year on year.

About two thirds of CapEx were spent on M and A in France and U. S, while roughly one third as organic CapEx mainly related to the works on assets under construction. Adjusted net profit was 175,000,000 Euro, down 22% year on year, notwithstanding the flat year on year EBITDA. This is due to higher depreciation and financial challenges associated to the new assets. Net financial position at the end of the year was about $1,800,000,000 higher versus the end of ’twenty three, but back in line with our central case in the guidance range.

Michele, again, will elaborate more on the cash flow over the period. In ’twenty four, we kept delivering on our strategy. We proved successful in execution, adding about five eighty megawatts with a mix of repowering greenfield M and A. ’24 marks our entry in The U. S.

Another pillar of our strategy, the route to market was addressed, I think, in a positive way. In fact, in ’24 and early twenty five, we signed five long term PPA contracts with corporates, utilities and tech companies for a total of half terawatt hour per year. Our PPA portfolio is now in excess of three terawatt hour per year. As far as financing, we proved to be very competitive. We issued our fourth green bond and we succeeded in obtaining our first financing from the European Investment Bank.

In ESG, we consolidated our top tier positioning in all ESG ratings and that has been included for the first time in the Standard and Poor twenty five yearbook. So I’ll say, ESG is fully embedded in our business model. As far as shareholder remuneration, we are going to distribute €1 per share in addition to a buyback for €23,000,000 that has already been executed. So 0.15 bringing say the total shareholder remuneration related to $0.24 to $1.15 per share. Let’s move on.

On Page seven, here a quick summary of our journey over the last four years since we announced a transformation into a pure wind and solar player. See, through our combination of M and A organic growth, we managed to add 1.8 gigawatt of new installed capacity, different geographies, wind and solar. In the meantime, we have returned approximately, I mean, over the same period of time, euros $850,000,000 to our shareholders. I would say a quite stronger execution. Page number eight, as you know, part of our growth relies and will keep relying on repower, a program that we started well in advance of the industry, which is now looking at it increasingly.

We believe we are financed in this field. We’re now two seventy megawatts already powered in operation. This chart shows some key numbers of repowering projects I think you’ve got to know, But those are actual numbers. Over these projects, we managed to increase the historic capacity 2.5 times and to more than triple the production. And these all occupying the same soil and reducing cutting by half the number of towers.

With an investments of roughly $360,000,000 we see both our return on capital employed and unlevered internal rate of return in excess of 11%, which is a premium compared to the traditional return in the industry. That’s why that’s because also we managed to switch from CFD awarded during past auction at €60 per megawatt hour with long term corporate PPAs at better pricing, more in line with current market conditions. So we expect the new wave of repowering projects to be eligible to be auctioned under the FERIX decree, which set CFD tariffs within a range of between 70 and €95 per megawatt hour. The decree was, as you know, was long awaited, but now since almost ready to be implemented with the first option expected to take place in 2025, I would say, by year end at the latest, we hope sooner. Let’s move on, Page number nine.

As I said, another pillar of our strategy is the commitment to securing the route to market for our production. It is becoming particularly important in a time of high volatility and uncertainty about enterprise. In the last four years, we have signed several major long term contracts with Tier one corporates, tech companies, utility for a total amount into a total 3.3 terawatt hour per acreage. So almost or about, say, 40% of our entire portfolio. We have been able to attract large corporates and utilities with a value proposition to cover their needs for zero carbon green energy.

Our PPA portfolio is made up of contracts of various durations ranging from short term five years. That’s usually for the duration we applied for old assets to up to twenty years for brand new assets. In a scenario of expected growing power demand over the next decades, driven by data centers, artificial intelligence, cryptocurrencies and all manner of new and energy intensive technologies. We believe, based on our track record, that we are very well positioned to capture this coming opportunity. Let’s now comment the regulatory framework evolution.

Compared to one year ago, we have seen some improvements across all the countries where we operate in the EU. There are now auction systems and remuneration schemes in most of our countries. And in Italy, the long awaited ferries decree has finally arrived. What is still lacking is a clear framework for storage given the growth we need for flexibility to cap all with the rest deployment. In Italy, we are waiting for the Max’s scheme, kind of a rather regulated asset based system tailor made for battery storage.

We are keeping a close eye on this evolution. But in the meantime, we have been developing a pipeline of storage projects to be exploited once the business environment turns favorable. Now we are monitoring it in order, say, to be prepared to capture this opportunity that we see to come. Here, page number 11, we show ERG as it’s today. So a solid and international platform of renewable assets with about 3.9 gigawatts of installed capacity today.

We can count on a pipeline of project for 5.1 gigawatt, a pipeline well spread across our geographies based on two technology, wind and solar and with a growing share in battery storage. Part of our pipeline, you know it, is based on co development agreement. This is in particular in US and Spain. And though we are advancing in the permitting based on our business model, we will move those projects into the construction phase only under certain conditions, among which our look to market fully secured at a level that can guarantee returns in line with our objectives. Here we are.

This is the platform we want to expand from and leverage on. So let’s move now to page number 13, a quick summary of our strategy is just an update compared to the one presented one year ago. We are enforcing our value over volume approach in a natural and detached on each point, selective growth. Focus will be more on repowering and organic pipeline. We now aim to reach 4.2 gigawatt of installed capacity.

We say are adopting a more cautious stance on The U. S. While waiting for the right timing, say just waiting for things to clear up. Investments in EBITDA, we are lowering 24, 20 six CapEx by 20% or 1,200,000,000.0 to 1,000,000,000. We are nevertheless targeting EBITDA of more than EUR 600,000,000 in ’twenty six.

Say lower CapEx said mainly factors in the delay in the FedEx rollout as well as a more cautious stance on USA. Route to market, we confirm our target to have 85%, ninety % quasi regulated EBITDA, which means backed by CFD or BPA. Balance sheet, we are committed to keeping an investment grade rating as we believe the debt capital market is the best option for funding. In the spirit of value over volume, we are targeting an unlevered return for our projects higher than 200 bps over work. As far as geographical diversification, we are more focusing on tier one countries where we aim to keep on growing and consolidating our presence.

As far as tier two countries, we’ll be, say, taking a more opportunistic approach even considering maybe some selected disposal. Let’s see. Storage and hybridization to increase asset portfolio flexibility. We expect storage to progressively become a new stream of growth and we are pushing on digitalization as well to optimize asset performance. This year remains embedded into our business model.

Last but not least, shareholder remuneration as part 25, EUR one as dividend. We have already executed EUR €00.15 per share through share buyback. And going forward, we confirm our commitment to pay one dividend with the potential upside to be pursued to share buyback based on yield performance and prospects. So I think still a superior yield compared to most of our peers. And here we show our pipeline and our selective approach on CapEx.

We have already said about the lower CapEx and the reasons behind it. In the meantime, we’ll keep pushing on the permitting side to make our pipeline advance in size and quality. And based on currency industry trend, we switched part of our PV pipeline projects into storage projects, utilizing basically the same the very same pieces of land and connections. This is in particular in Spain. We can rely on a solid pipeline of repowering projects mainly in Italy, but also in France and Germany.

Let’s move to Page 15. Here you have a list of assets currently under construction for a total amount of 130 megawatts greenfield powering in our first battery storage plants. Those assets are spread in Italy, France, UK. In addition to that, we can count on a fully authorized 500 megawatts, which is basically waiting for securing the route to market before taking the final investment decision. Page 16, this is the Italian case for powering.

As mentioned, repowering is one of the main drivers of our future growth. And this is a study conducted by an independent energy advisor on the potential for powering an equity. So according to the study, about 45 of the Italian fleet may be suitable for powering, bringing an additional 7.5 gigawatt wind capacity on stream from now to 2,030. So, for powering, looking at the system, not just our company specific, could contribute significantly in reaching the target set out in the national plan. This kind of exercise could be repeated in every country in Europe.

Given our experience accumulated not how over time and track record we feel we may play a major role when it comes to repowering. And in fact, moving to the next page, here you have more details on our repowering pipeline. To repowering, as said millions of times, we will enhance the efficiency of the assets by replacing outdated with cutting edge turbines able to capture wind in a larger span of the lost. This translates into higher productions. Doing this, we can double the installed capacity, triple or more than triple the production, halving the number of towers and then occupying the same soil.

That’s why we believe this development should be well accepted by local communities. I’ve already said that since ’23, we have brought into operation for projects. Some are still under construction. Some are fully authorized in Italy, but also in France and Germany and still waiting for CFD options. All in all, we are talking about a sizable pipeline of about 800 megawatts that are 400 megawatts on a differential basis.

Here, let me again underscore our value over volume approach because this is I need to be clear on this. We need, first of all, to get the tariff and secure the route to market in order to guarantee the returns of the project are consistent with our project with our targets. So now that the Fedex decrease in place in Italy, we envisage a potential opportunity to bring on our projects. Let’s move to Page 18 over the business plan period. We expect to explore more and more the opportunity to increase the flexibility of our asset portfolio by developing projects in battery storage.

In addition to our first projects already under construction, which will be concluded on stream in ’twenty five, we can now count on one gigawatt of pipeline between Italy, Spain, France and UK, out of which 120 megawatts already well advanced. But we still need the schematics to be set out. So let’s move to page number 19, ESG. Although from the outside, ESG seems to be losing centrality, we still believe it’s important as long as we look at substance over form. ESG is naturally embedded in our business model.

As far as planet, we remain focused on net zero by 02/1940. We will be working on our supply chain as we are already almost net zero on our asset portfolio. Circular economy is the way through which we are implementing our empowering projects. As far as engagement, we continue to support local communities and ensure the involvement of local younger generation in educational programs to our academy. Regarding people, our top priority is the health and safety of our employees.

In addition to that, we aim to create a more inclusive. As for governance, we are pursuing, say, a continuous improvement regarding our already rated best in class governance with a focus on supply chain to align our suppliers to our key ESG priorities. To sum up, I would say we have a clear ESG strategy based on well defined targets and KPIs.

Michele, CFO, ERG: Thank you, Paolo. Good afternoon and thank you for attending this webcast. A driver of our economics is represented by the phasing out of the incentives in the period. It is something well known. The incentive phase out relates mainly to Italy, but also to our oldest owned farms in France, Germany and Bulgaria.

We can manage and reduce the otherwise increasing merchant disposal to a combination of PPAs and the following. First of all, we can secure the sale of old assets for PPAs, both corporates and utilities, maybe of shorter panels five years. As we recently did and announced the 400 terabyte power with three different counterparties, who was closed between end of twenty twenty four and first quarter twenty twenty five. A second option is the repowering of the asset that we can become again eligible for long term CFDs after the investment. As you can see in this chart, most of our 2025 production is hedged through short term margin, green certificate, long term PPAs and CFDs.

A limited portion of our production is still exposed to merchant volatility. That’s unavoidable also considering the intermediate nature of our sources and the structure of data entry. Overall, the revenue structure is well secured, which is an important factor for delivering stable results, a distinctive feature in our business model. Also, our debt structure contributes to the stabilization of our results. Indeed, you can see that the interest rates on our gross sustainable debt are entirely fixed.

These rates are extremely competitive since we have shifted from no recourse project financing to green bonds in 2019 and 2021 during an ultra low rate environment. Aside from our ample cash availability, our liquid position is further strengthened by a fully enrolled 600,000,000 Euro revolving facility. With thermal conditions have been improved in 2025, sorry, 2024 together with its substantial to 2027. Fixed and competitive interest rates together with the non subordinated nature of our gross debt allow us to have the cash generated by the group at full disposal. It is also on the basis of this balance sheet strength that our rating has been affirmed at the investment grade level in 2024 by Fitch.

A renewal formation by the rating agency is expected in the next month. In the business plan period, we forecast to reach a net financial position in area €1,900,000,000, maintaining our leverage ratios well inside our rating corridor. Material growth CapEx occurring during 2024 and not contributing EBITDA for a full twelve months together with lower than average redevelopment in Q4 last year and fourth months of 2025 have temporarily shrunk the FFO net leverage bedroom, which is nonetheless expected to recover in the near term. We confirm our strong commitment to the investment grade rating, the flexibility in our CapEx plan that is in large portion discretion and the full ownership of our EU asset give us powerful tools to sustain our rating also in case of material deterioration of the market share. The figures you can see here actually at slide 24, where we rank in term of cost of debt of compared to an average of investment grade higher rated utilities into a panel of pure risk players.

We project the cost of cross debt that remains moderate in the business plan period, thanks to the group DCM funding structure. The cash generating nature of our business together with balance sheet solidity and financial charges competitiveness have been Aram will remain the main driver of our superior dividend yield compared to the sector. Now let’s move on to comment on the quarterly results. First of all, I would like to focus on the extreme wind drought which affected EU since October and which persisted even during the first months of 2025. There is a name to describe this peculiarity, juncture flout and namely periods with very low wind and solar generation.

As you can see in this chart and ranging from all different sources at international level, these periods of wind droughts already took place in the past, but are quite rare. The map above shows the deviation of wind speed in Cufour in EU against the long term average. In that blue regions where the negative deviation is large. It’s clearly evident that the older regions where we have our own farms have been affected by a extremely low wind. In Italy according to Terna, wind production on a like for like basis was down 26%.

In the chart below, we show what happened at the historical level to our Italian portfolio. As you can see, these are still reporting condition which took place in 2024 were already experienced ten years ago. So this was a generalized and exceptionally negative trend in the last quarter of twenty twenty four. And this is continuing in the first two months of this year. Following the premise on wind availability, the comment on the fourth quarter is quite obvious.

In Q4, we have EBITDA at 145,000,000 lower than Q4 last year, mainly due to the extended wind production recorded in Europe as just commented, only partially offset by production from new capacity in operation. In Italy, EBITDA higher than Q4 twenty twenty three by 5,000,000, mainly thanks to higher capture prices, driven by higher hedging prices and green incentive, which is €42 per hour and it was while it was new in Q4 twenty twenty three. And by the contribution from a repowering asset and new greenfield plant entering operation during 2024. Results were most offset by the extremely low production over the quarter that reached only seven zero eight gigawatt hour minus 17% year on year despite the perimeter effect plus 109 gigawatt hour. EBITDA abroad set at 64,000,000 in Q4, lower than Q4 twenty twenty three by 18,000,000, mainly driven by wind production below historical trends in Europe and negative price effect in particular in Spain.

Both effects are partially offset by the new asset contribution in France, Spain and United States. Production abroad in Q4 reached 1.1 terawatt hour plus 6% year on year, mainly due to perimeter factor of two ninety four gigawatt hour of which two forty gigawatt hour in United States, partially offset by the ready commented low windiness in the period. Let’s comment now on investment. In 2024, we invested $553,000,000 mainly due to acquisition of windlass or plants in The US and France. In addition, we completed about $234,000,000 of organic compounds, of which 135,000,000 in Italy for repowering the end greenfield wind asset and our first storage plant in season.

The remaining amount refers to construction of the wind parks in France, UK and the repowering of the small wind farm in Europe. In the last two years, we invested more than $1,000,000,000 substantially in line with the EBITDA of the

Paolo Merli, CEO, ERG: same year.

Michele, CFO, ERG: Let’s now move on to the financial commenting on other items of profit and loss. The last quarter of last year, amortization and depreciation are 70,000,000 higher than Q4 twenty twenty three, mainly due to incapacity installed. Net financial charges are at 9,000,000 versus 2,000,000 Q4 20 20 3. Financial charges versus banks and bondholders net of liquidity remuneration stand to 4,600,000.0 plus 2,900,000.0 versus Q4 twenty twenty three. The complement to 9,000,000, 4 point 4 million are not cash accounting items such as effects coming from tax equity partnership in US, figuratively interest expenses according to IFRS 16 or capitalized interest.

Tax rate in the quarter is 31% higher than 24% of Q4 twenty twenty three, which included asset benefit in Italy. The adjusted net profit of the quarter amount to 45,000,000 lower than last year 77,000,000 mainly driven by the already commented extremely low windiness in Europe. Finally, let’s take a look at the cash flow statement and the net financial position. The net financial debt closed at 1,800,000.0, 0 point 3 million higher than the end of twenty twenty three, mainly driven by a solid catchers generation from EBITDA netted by the already commented investment of the period. The cash financial charges for 70,000,000, the tax cash out of 39,000,000 and the net working capital, another item for 75,000,000 of which 35,000,000 related to one off taxes on goodwill release already commented in previous quarters.

Finally, we remunerated our shareholder for almost $200,000,000 with even a distribution for $152,000,000 and share buybacks for $47,000,000 And now I leave the floor to Paolo for his final comments on guidance and business plan.

Paolo Merli, CEO, ERG: Thank you, Michele. Now let’s see our guidance for 2025 and then I’ll wrap up with my final remarks summarizing what we have presented so far. EBITDA ’25 is expected within the range of five forty million dollars six hundred million dollars This guidance is factoring the first two months of the year with a persisting exceptional wind drought across Europe, say, if we had added either the same wind condition as last year in January and February or in line with historical levels, EBITDA guidance would have been around million, million higher than the one we are proposing today. We can’t rule out there could be some kind of recovery in the months to come. But when setting out the budget with our Board of Director, we prefer to be cautious and assuming the P50 wind assumptions for the remaining ten months of the year.

CapEx is expected to be in the range of EUR 190,000,000 to EUR 140,000,000 as already explained. In 2025, CapEx will be focused on assets currently under construction. Net financial position at year end is expecting the range of 185,000,000,000, 1 hundred and 90 5 billion euro. And then coming to the conclusion, page 13, let me summarize the main key targets. Select the growth and value over volume approach confirmed and reinforced with 20% CapExpected in 2024, ’20 ’20 ’6, mainly driven as said by delays of Verix and a more cautious stance on U.

S. Quasi regulated business model confirmed EBITDA higher than €600,000,000 of which 85%, ninety % secured through CFD and PBA. Strong balance sheet, we are committed to maintaining an investment grade rating and a competitive cost of financing. This will give us further room to leverage and accelerate growth whenever the business environment condition will be there. Given policy, we are providing a flexible annual shareholder remuneration with a floor of €1 dividend and the flexibility to allocate extra cash on buyback based on yearly performance and prospect.

Thank you very much for listening and we are now ready to take your questions.

Conference Operator, Coruscant: This is the Coruscio conference operator. We will now begin the question and answer session. First question is from Paul Cabran, Kempen. Please go ahead.

Paul Cabran, Analyst, Kempen: Yes. Hello, everyone. Good afternoon and thank you for taking my question. I have a few of them. First, I noticed a small change in your value creation targets.

I think last year you were targeting 200 to 400 basis points and now you are mentioning more than 200 basis points. So have you become more prudent? On the contrary, do you think there is upside above 400 basis points? And then looking at the share buyback, I think you used to have a cap of 0.3 per share for the share buyback. I see no more mention of this cap.

So does this mean that you are willing to return to shareholders anything that’s not invested and we could see maybe share buyback of I don’t know $0.4 0 point 5 0 dollars And last question, your main shareholder SKU Renewables own I think 77% of voting rights, which I think is enough to initiate a delisting. So considering where the share price stands today, it would be much cheaper to do so than actually building New Megawatts. So is it fair to assume that the option of delisting is on the table? Thank you.

Paolo Merli, CEO, ERG: Okay. Thank you for your questions. I’d say the first one, if you look at carefully the webcast presentation, you will notice that 200 the value creation is 200 bps plus on WACC. That means 200 basis points is the floor at which we set our other rate for investments. Last year, yes, you are right.

We say a range of 200, four hundred bps considering a spectrum of investments ranging from fully secured, then you have to see the floor 200 to fully merchant taking the risk of covering the production after the investments. But this is not anymore the case. So we are just looking at assets in particular already with a route to market already secured. That’s the case also for our powering, for instance. We have, I don’t know, 400, five hundred megawatts of projects already authorized.

But we didn’t start, we haven’t started yet the say the construction because we are waiting to securing the route to market. So the project the final investment decision on the project, that’s our business model, will be taken after we awarded a CFD or having closed a PPA to secure the production. That’s one of the reason why we had slowed down the CapEx and the deployment of CapEx and megawatts because we were and we are still waiting for the first option of ferics in Italy plus the outcome of other options in other countries in Europe apart from the more cautious stance on The U. S. So that was the first answer to your question.

So 200 bps should be seen as a floor. The share buyback, yes, last year we specified or we identified a collar for shareholder distribution in the region of $11.3 1 as a dividend and the potential upside through a share buyback. So you are right. You have to see the fact that we haven’t mentioned a cap as the desire to keep full flexibility in deciding when and how much buyback share buyback to do in case. Yes.

So it could be even more than the $0.3 per share.

Michele, CFO, ERG: The

Paolo Merli, CEO, ERG: third question is about the listing. I think this question should be addressed to our shareholders and not to the management because honestly there is a kind of Chinese war at least on these issues as it’s fair and right to be. For sure, the current price is not something that makes us happy because we have the perception, the stock now trades at a huge discount versus the operational assets, not the old company. Just 25% or 30% discount to the existing operational assets. That’s our view based on internal analysis.

That’s it’s what I can say about that.

Paul Cabran, Analyst, Kempen: Fair enough. Thank you very much.

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

Conference Operator, Coruscant: Next question is from Enrico Bartoli, Mediobanca. Please go ahead.

Enrico Bartoli, Analyst, Mediobanca: Good afternoon and thanks for taking my question. The first one is relating to the evolution of capacity additions of the plant in 2026. You have 130 megawatts each hour under construction that you highlighted and you acquired also some asset in The UK. I was wondering what you think that would be most likely the evolution for the remaining assets in order to reach the target in terms of geographies. And if you can provide some comment on the pipeline that you have in The US considering the current situation on the regulatory side.

The second question is related to batteries. You highlighted that, actually, you are now definitely considering a more open to investments in this technology. And, actually, this could be, if I understand well, mostly connected with the existing wind and solar asset. I was wondering what kind of returns you have in mind in order to take final investment decisions related to those assets. And if you can comment a bit about the regulatory frameworks, particularly the upcoming MAX market in Italy and what could be the opportunity also in markets like Spain and Germany?

The last one is on asset rotation. It seems that if I write that this is the first time that you mentioned this potential. If you can provide some details in terms of the geographies that you think could apply in terms of disposal of asset and if you have any discussions ongoing on this matter. Thank you.

Paolo Merli, CEO, ERG: Okay. Thank you, Vikros. So the first question about the megawatts, yes, you are right. The new target for 2026 is 4.2 and we have already secured basically we have roughly 130 megawatts right now under construction that coupled with the 43 megawatts we just acquired in Scotland, say cover half of the target. Honestly speaking, the pipeline already authorized has got a time to market.

I mean, the time needed to bring these projects into operation that is in the range of eighteen to twenty four months. So all these projects, even in case they will be awarded a CFD in the next auction in Italy or France or Germany. It will take time to be built and they will come probably in 2027. So the remaining part in our objective is covered by the co development agreement in U. S.

Because we still would like to increase our portfolio. It’s true that the new administration is not doesn’t seem very supportive on renewable, but please consider that our business model in the area, in the country is, let me say, derisked because under the preferential right we have in place with Apex, Ergo buys assets or is going to buy assets just under three condition precedent three condition precedent. One, the first one, the most important is the asset that should be already operative. So we’re going to pay the asset in case we find the agreement at the commercial operation date. And the asset is already secured has already secured the sales of production under a PPA agreement and a tax equity scheme is already in place.

So we do not expect, let me say, in other words, in The U. S, retroactive measures to change the economic case of already existing assets. That’s the way we want to grow there in the country. And we are waiting just for the right moment. So just to summarize the answer, half is secured and already under construction in 2026 in 2025 and 2026.

The remaining part that should come at at least in our objectives from the co development agreement in U. S. Or other very selective M and A in Europe. And this gives me the opportunity to answer also the last question because as I said during the presentation, we are going

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