Earnings call transcript: Unnamed Company Q1 2025 shows strong growth

The unnamed company reported robust financial results for the first quarter of 2025, with significant growth in adjusted EBITDA and net income. Despite a decrease in investments, the company maintained a strong cash flow from operations and continued strategic expansions in the European energy market. The earnings call highlighted several key developments and future guidance, positioning the company for continued success amid a volatile market environment.

Key Takeaways

• Adjusted EBITDA increased by 8.3% year-over-year to €761 million.
• Adjusted net income rose by 21.2% year-over-year to €46 million.
• Investments decreased by 22% compared to Q1 2024, totaling €300 million.
• The company confirmed its full-year 2025 guidance, expecting significant contributions from associates.

Company Performance

The unnamed company demonstrated strong performance in Q1 2025, with notable increases in adjusted EBITDA and net income. This growth is attributed to strategic acquisitions and expansions in the European energy market, despite a challenging macroeconomic environment. The company’s focus on innovation and infrastructure development, particularly in hydrogen, positions it as a leader in the energy transition.

Financial Highlights

• Adjusted EBITDA: €761 million (+8.3% YoY)
• Adjusted Net Income: €46 million (+21.2% YoY)
• Investments: €300 million (-22% vs Q1 2024)
• Net Debt: €16.8 billion
• Cash Flow from Operations: €779 million

Outlook & Guidance

The company confirmed its full-year 2025 guidance, anticipating €350-370 million from associates. It continues to explore potential hydrogen investments beyond 2030 and aims to increase its sustainable finance ratio to 90% by 2029. These initiatives underscore the company’s commitment to sustainable growth and innovation in the energy sector.

Executive Commentary

CEO Stefano Beniere highlighted the company’s resilience in a volatile market, stating, "We have delivered solid first results in the first quarter of the year despite an environment marked by high uncertainty and volatility." He also emphasized financial stability, noting, "We are achieving growth while maintaining a strong balance sheet and sound financial flexibility."

Risks and Challenges

• High net debt levels pose a financial risk if market conditions worsen.
• Decreased investments could limit future growth opportunities.
• Geopolitical risks in Europe, particularly related to gas supply, may impact operations.
• Regulatory changes in Italy could affect profitability.
• Potential implications of a Russian gas ban require careful monitoring.

Q&A

During the Q&A session, analysts inquired about the potential impact of a Russian gas ban and regulatory changes in Italy. The company also addressed its hydrogen investment strategy and expectations regarding the weighted average cost of capital (WACC) and cost of debt. These discussions provided valuable insights into the company’s strategic priorities and risk management approaches.

Full transcript - Snam SpA (SRG) Q1 2025:

Chorus Call Conference Operator: Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining this NAM First Quarter twenty twenty five Consolidated 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 Ms. Francesca Pizzoli, Head of Investor Relations of NAM. Please go ahead, madam.

Francesca Pizzoli, Head of Investor Relations, NAM: Good afternoon, ladies and gentlemen. Welcome to the presentation of NAM Q1 twenty twenty five consolidated results approved by the Board today. The presentation will be hosted by Znam’s CEO, Stefano Beniere and by Znam’s CFO, Luca Passa. Stefano will provide an overview of the excellent financial and industrial results achieved along with regulatory and market updates. Luca will provide a detailed financial performance overview.

Then back to Stefano for closing remarks and finally the Q and A session. I will now hand over to Stefano.

Stefano Beniere, CEO, NAM: Thank you, Francesca. I’m on Page two with the key highlights on the first quarter. In Q1 twenty twenty five, we have delivered another set of sound results despite the market turmoil and the volatility. The adjusted EBITDA of $761,000,000 is up 8.3% year on year driven by growth in regulated revenues. Adjusted net income at $4.00 €6,000,000 is 21.2% year on year up, thanks to the higher EBITDA and greater contribution from associates only partly offset by higher depreciations and income taxes.

Investments at $300,000,000 in ’61 are down 22% versus first quarter twenty twenty four following the completion of works related to the Ravenna LNG Terminal and higher transport third parties contribution. Net debt was at $16,800,000,000 mainly reflecting investments carried out and the payment of 2024 interim dividend for almost $400,000,000 The average cost of debt was stable at 2.5%. Several updates on M and A, asset rotation and financing front. First, on March we have closed the acquisition of Edison Stochelje that contributed to first quarter results for one month. Second, we sold the stake in ADNOC gas pipelines to Lunate for $234,000,000 crystallizing at 14.5% IRR and booking $120,000,000 of capital gain net of taxes.

Third, on April 7, Snam and null Investments, an investment vehicle wholly owned by Abu Investment Authority, entering into a sale purchase agreement for the acquisition by SNAM of the 24.99% stake in the share capital of Fear Gas Holding, which indirectly owns the entire share capital of Open Grid Europe, OGE, for an equity value of $920,000,000 At the same time, Znam agreed to sell to Fluxus a stake of approximately 0.5% of the shares capital of Fear Gas Holding so that NAM and Flaxis upon completion of such transactions will hold substantially equal shareholding in VGH. As a result, Snam will become the first ever Italian energy player to make a sizable entry into the German energy infrastructure space. So then strengthening end to end presence the South North Corridor and its position as Europe’s largest gas infrastructure operator in line with the strategy to develop a pan European multi molecule network located along the key European energy corridors. Today, the Board of Directors approved issuing hybrid bond by thirty first December twenty twenty six for up to $1,000,000,000 to finance the deal, maintaining so the financial flexibility, diversifying funding and investors and optimizing the financial structure. After the deal, both Moody’s and Fitch reaffirmed their credit rating while S and P raised it to A minus following the upgrade of the sovereign confirming Armstrong credit profile.

Now I’ll move to page three to dig into the regulatory framework at gas market. On the regulatory front, the weighted average cost of capital formula was updated for the next three years period providing future visibility across all regulated businesses. With the Resolution 130, the regulator has finally changed the RAB indexation to the harmonized index of consumer prices for the European Union countries relating to Italy, so called Ipka Italy. At the same time, the deflator for 2024 was updated to 7.9% from the previous 5.3% in order to recover the past adjustments. This effect as a one off of $52,000,000 effect related to 2024 recovery, which was fully booked in first quarter and the positive effect of $10,000,000 per quarter from the first quarter twenty twenty five onward.

Considering the application of the Areira one hundred and thirty resolution, the 2025 tariff RAB is lifted from €25,800,000,000 to €26,200,000,000 Moreover, the regulator defined the rules for the sixth regulatory period for storage, confirming the overall setup and introducing a bonus malus incentive on CapEx spending versus the budget and the criteria for drafting the single ten year development plan for the entire gas sector. In the period January, European gas demand was 105 BCM with an 8% growth or 7.5 BCM more compared to the previous year, driven particularly by Germany, UK and Italy. Italy gas demand then in particular was up 10% in the first quarter twenty twenty five, mainly driven by higher thermoelectric demand as a fact of lower electricity import and hydro production. Today, there are approximately 130 active point injecting biomethane in the network with 15% year on year increase production. Now I turn on page four for some key achievements.

Also in the first quarter twenty twenty five, we progressed on the key levers of our strategy to build a pan European multi molecule operator. Specifically in gas infrastructure, the regasification units BW Singapore moored 8.5 kilometers offshore successfully completed the commissioning operation within the scheduled time. The regasification activity will begin next days with the capacity being made available through competitive auction procedures in accordance with the current regulatory framework. Second, as of today Italy received around 60 LNG tankers, half of which coming from United States for a total volume of almost 6,000,000,000 cubic meters, equally to approximately 30% of the gas volumes imported into the country. Third, at the April, the storage level reached 47%, approximately 10% higher than the European average.

Furthermore, 90% of the available storage capacity for the year twenty twenty five-twenty twenty six thermal year was allocated. This will facilitate the achievement of the 90% infilling target before winter. Moving to Energy Transition. Reno’IT backlog is stable 1,400,000,000 with on biomethane 14 plants won tariff auctions in January, about 30 megawatt 100% of plants submitted. This implies that out of the 78 megawatt 2028 target, 72, so almost more than 90% are already in operation under construction or finally authorized.

Looking at the sustainability initiatives, 28% of the CapEx aligns with the EU taxonomy and 52% with the SDGs in the first quarter of the year. A new sustainable finance framework including sustainability linked bond section assessed by Moody’s was launched. It includes a new 02/1935 target that implies minus 65% of the Scope one and two emissions, carbon neutrality by 02/1940 and 02/1950 net zero goal. ESG investors make up about 43% of our institutional investor base above average of the sector and Italy and Italy. Finally, Snam is committed to adopt the TNFD framework early to demonstrate the commitment to biodiversity.

Let’s now focus a bit more on the gas market in Italy on page five. In the first quarter of twenty twenty five, gas demand reached 21,840,000,000 cubic meter, up by 10% compared to the same period in 2024, the highest level in the last three years. This growth was mainly driven by higher consumption, firstly in thermoelectric sector plus 1,400,000,000 cubic meter or 22 supported by a decrease in electricity imports and lower hydroelectric production due to lower rainfalls. And second, the residential and tertiary sector up by $05,000,000,000 after colder average temperatures and the easing of prior energy saving measures, whilst consumption in the industrial sector remained substantially stable. If you look at decline adjusted gas demand that amounted to 22,490,000,000 cubic meters showing an increase of 1,510,000,000 cubic meter or 7.2% compared to the same period of last year.

In April, natural gas demand reached approximately 4.2 BCM, again up 2% year on year. As in previous months, demand from the power generation sector committed to continued to grow plus 19%, mainly driven by reduced hydroelectric production following last year exceptionally high rainfall. Residential consumption will decrease 9% due to milder weather than previous year, while industrial demand again remained stable. LNG volumes up by 10% in the first quarter, representing as we said about 30% of the total gas inflows in the country. Liquefied natural gas provided a key contribution to the diversification of energy supplies to Italy.

In 2024, just to remind you, LNG met the quarter of Italy’s gas demand with 150 ships from around 10 different countries reaching the four regasification units in Italy, which now with the entry into operation of the Ravenna Terminal will become fine, providing then a fundamental contribution of the Russian gas phase out at least for Italy. Export to Austria was $500,000,000 out of $600,000,000 of the total export, which is almost three times compared to the export we recorded in the first quarter of last year. I will now hand over to Luca for a detailed financial performance overview.

Luca Passa, CFO, NAM: Thank you, Stefano, and good afternoon, everybody. Moving to Slide number six. Out of the total amount of around €400,000,000 in the first quarter of investments, 28% is EU taxonomy aligned and includes. With regard to gas infrastructure, H2 radio replacement, dual fuel compressor station, BioMetam plant connection. As for the energy transition businesses, H2 and CCS, a large part of the BioMetam depending on the plant’s technical standards and energy efficiency, excluding cogeneration.

SDG alignment is instead 52, of which the majority goes towards SDG seven, nine and thirteen, respectively, affordable and clean energy, industry innovation and infrastructure and climate action. Almost 50% of CapEx are development investments underpinning the industrial growth phase of the company. Let’s now move to the first quarter twenty twenty five EBITDA analysis on Slide number seven. EBITDA for the period was €761,000,000 plus 8.3% compared to last year or plus €58,000,000 The growth is mainly attributable to regulatory items for a total of around €36,000,000 related to the recognition of the 2024 deflator update for €52,000,000 the adoption of the Italian Ipka for the RAB revaluation starting in 2025 for around €10,000,000 partially counterbalanced by the WACC decrease for around €26,000,000 Regulatory revenues increased for around €29,000,000 Stojik Adriatica that entered into the perimeter from the 03/03/2020 positively contributed by €4,000,000 to the first quarter EBITDA. In details, the regulated revenue growth was driven by transport and storage revenues increased by around €33,000,000 linked to the investment plan execution, higher allowed OpEx mainly due to the inflation.

These effects were partially counterbalanced by output based reduction of around €16,000,000 versus last year, mainly attributable to the storage reverse flow service and by the expected phase out of the input based incentives. The increase in gas infrastructure operating costs of about €13,000,000 is mainly attributable to the lower costs in large part due to the new hires and lower inflation and to the FSRU’s costs. With regard to the Energy Transition business, the 2,000,000 EBITDA contribution is mainly driven by BioMetane supported by higher volumes and efficiency gains achieved through their organization carried out in 2024. Moving to the associates on Slide number eight. In the first quarter, our associates contributed to group net income by €107,000,000 30 2 million euros increase compared to the same period of the previous year.

The total contribution is rated for approximately €74,000,000 to the international associates and for €33,000,000 to Italian associates. In details, TAP’s slight higher year on year contribution is driven by inflation adjusted tariff and lower net financial expenses. In the first quarter twenty twenty five, TEP covered 17% of Italian imports, confirming its position as the second largest import route by our pipeline. The ongoing 1.2 BCM expansion is expected to be operational by the beginning of twenty twenty six. Sea Corridor operating performance is substantially in line year on year with approximately 5.5 BCM transported to Italy in the first three months of the year, while the higher net income contribution is mainly driven by lower operating costs and the positive effect of the earn out debt write down.

Moving to Austria. In 2025, the new regulatory period started with the stabilization of the volume risk. CAG benefited from higher allowed revenues versus last year, bringing net income contribution to positive. It’s around €20,000,000 Also, GCA’s performance benefited from the higher allowed revenues, partially offset by the worsening in the booking situation, which will be recovered in the T plus two tariff. In the first quarter, we also recorded a significant increase of exports to Austria.

Performance in France is substantially in line with the first quarter of last year despite higher energy costs due to the strong storage withdrawal and higher interest rate expenses after the bond refinancing. TERGA is developing its section of the H2 Med corridor together with the project partners, including OGE. In Greece, the extra lower contribution is due to lower auction premium on LNG imports and exports to Bulgaria, now in line with historical trends. However, Greek demand rose by 30% compared to the first quarter last year, driven by a colder winter and higher demand for power generation, which might bring further upside during the course of the year. Alexandroupolis FSRU is expected to be back in full operations with the next terminal year twenty twenty five-twenty twenty six.

Also around the Rebitus LNG terminal, all the slots have been booked for the period twenty twenty five-twenty twenty nine. Interconnector’s contribution in The U. K. Remains in line year on year since we are reaching the yearly regulatory gap, thanks to the capacity almost 50% booked until 2026. EMG, slight lower contribution is due to the recording of positive nonrecurring items in 2024.

The asset is operating close to maximum capacity. Regarding ADNOC, in March, we completed a stake disposal. Here, we represent only one month of net income contribution, while you can see that at a consolidated reported level, the capital gain benefit, as mentioned by Stefano before. Starting from the third quarter, we expect contribution from the consolidation of the stake in OG for approximately €10,000,000 to €50,000,000 in 2025. Finally, Italian associate growth is mainly driven by Ital Gas overperformance in the first quarter.

Let’s now move to the first quarter net income analysis on Slide nine. Adjusted net income for the period was $4.00 €6,000,000 plus 21.2 compared to last year due to higher D and A by €6,000,000 falling rising investment and the enter into perimeter of Stojita Adriatica, partially counterbalanced by the absence of the write down on gas infrastructure made in the first quarter of twenty twenty four. Lower net financial expenses by €7,000,000 Financial expenses related to debt recorded a modest increase, reflecting higher financial indebtedness and a marginal increase in the average cost of net debt will reach approximately 2.5% compared to 2.4% over the same period last year. The increase was more than offset by non debt related items, in particular, higher capitalized financial expenses. A higher contribution from associates, as already commented, which was the result of higher international associates contribution for €22,000,000 and higher Italian associates for €10,000,000 Finally, higher taxes due to higher EBT for the period.

Turning now to cash flow on Slide number 10. Cash flow from operation for the period amounted to around €779,000,000 and was the result of $5.00 €8,000,000 of funds from operation and €271,000,000 of working capital cash generation. The change in working capital was mainly driven by the regular working capital with around €450,000,000 positive due to tariff related items, mainly driven by the additional tariff components around €140,000,000 negative absorption due to the balancing and settlement activities and default service and about €30,000,000 negative related to energy transition net working capital, mainly driven by energy efficiency, trade payables decreased, partially counterbalanced by Superbono’s fiscal credit decrease. Net investment for the period amount to €975,000,000 including €564,000,000 of cash out related to Stojito Adriatica and around €234,000,000 of ADNOC disposal cash in. Other outflows were related to the payment of the interim dividend for €389,000,000 resulting in a change in net debt of about €560,000,000 Moving to Slide 11.

Net debt amounted to €16,800,000,000 at the end of the quarter. Net cost of debt, which was is calculated as financial charges net of liquidity incomes on average net debt for the period moved from 2.4% in the first quarter of last year to 2.5% in the first quarter of this year, while the fixed floating mix is at 80% to 20%. Sustainable finance ratio is at 85%, well on track to reach our long term target of 90% by 2029. The new sustainable finance framework has been published, including new targets on carbon neutrality for Scope one and two by 02/1940 and net zero for Oscope by 02/1950. Demonstrating the company’s strong and ongoing commitment to sustainable finance, Znam has been honored with the prestigious Sustainable Issue of the Year award by IFR International Financial Review.

This recognition highlights the company and wavelength dedication to energy transition and its adoption of innovative sustainable financial instruments. Credit ratings were affirmed by Moody’s and Fitch following the OG acquisition announcement, while S and P raised NAM positioning to A minus following the upgrade of this offering, which is a recognition of NAM stock grading metrics. Based on the first quarter twenty twenty five economic and financial performance, we are comfortably on track to deliver the full year guidance that will be updated in the first half to reflect, among others, the Arera one hundred and thirty resolution, which has lifted 2025 tariff RAB from €25,800,000,000 to €26,200,000,000 and recognized €52,000,000 of extra revenues related to the 2024 deflator adjustment. On net debt, the guidance is confirmed assuming the issuance of hybrid instruments to finance the 24.9% OGS stake acquisition with the hybrid that was approved in the Board today. I will hand over now to Stefano for the closing remarks.

Stefano Beniere, CEO, NAM: Thank you, Luca. In conclusion, we have made, I think, further strategic progress on our strategy to build the pan European multi molecule infrastructure at the crossroads of the main European energy corridors. Significant milestones include the agreement to acquire just recalled by Luca of the 24.99% stake in OGE, the largest independent German gas TSO, the closing of the Edison storage acquisition, the Ravenna regasification terminal operations launch and the award of 14 projects in the last GSE auctions for biomethane production. We have delivered solid first results in the first quarter of the year despite an environment marked by high uncertainty and volatility. We enjoyed strong visibility and are very comfortably on track to deliver the full year 2025 guidance.

We are achieving growth while maintaining a strong balance sheet and sound financial flexibility as reflected in our credit rating upgrade to A minus by Standard and Poor’s. Finally, let me slightly diverge from the standard protocol. As you know, this is my last presentation as CEO and I would like to sincerely thank you all for the attention, credit and time spent to follow the company and its last three years development journey. For me, it has been a pleasure to serve as CEO of this real unique company. And now we are available to take your questions.

Chorus Call Conference Operator: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. First question is from Sarah Lester, Morgan Stanley. Please go ahead.

Sarah Lester, Analyst, Morgan Stanley: You very much and thank you, Stefano, first of all, for all you’ve done to Sam over your time there. I’ve got two questions, please. Firstly, related to today’s result. Wondering if you can please quantify or provide just a little bit more color on a forward looking basis on how the associates portfolio income that you did talk about on Slide eight, how this is expected to evolve over the rest of the full year? And then a high level question, please, on regulation in Italy.

Something we’ve, of course, heard loud and clear from investors for a long time is the desire for simplicity in regulation. So my question is, given your unique perspective as a regulated business and your conversations with Arera, do you see that there is an understanding and recognition of this within the regulatory circles in Italy? And so I’d be interested in your views on anything Areira is doing or could do better in order to simplify regulation in Italy? Thank you very much.

Luca Passa, CFO, NAM: Okay. Sara, thanks for the question. So for the first one, in terms of associates performance or expectation of performance throughout the year, let me say that excluding OGE contribution, which is expected, as I say, starting from the third quarter, we’re expecting a contribution overall of over €350,000,000 for the full year. The majority of the delta vis a vis last year, as we mentioned also in the business plan presentation, is driven by Austria. Now including also the OGE contribution, if we basically execute on the closing of the transaction, we would be approaching just shy of €370,000,000 of contribution for the full year.

And that’s regarding associates, where the increase clearly comes for both the international portfolio as well for the Italian one that will contribute in the region of €110,000,000 for the full year. On regulation, probably just commenting, Herrera has basically board renewal expected by the July this year. Therefore, we need to expect a new Board in order to assess how much simplification can be done. But let me also stress the fact that notwithstanding the Italian regulation across the different, I would say, regulated businesses, not only gas, but also including clearly electricity, waste and water, is, as you know, one of the most reliable across Europe. Therefore, even if some simplification can be done or can be achieved, probably will take some time, and it will be part of the ROS full introduction when it will be taken, at least for the two major businesses, which are clearly gas and electricity.

Sarah Lester, Analyst, Morgan Stanley: Thank you very much.

Chorus Call Conference Operator: Next question is from Javier Suarez, Mediobanca. Please go ahead.

Javier Suarez, Analyst, Mediobanca: Hi, all. And many thanks, Stefano, for your job at SNAM these three years. And now three questions. The first one, high level question is that on the security of supply for Europe. So the European Union has recently presented a plan to fully in dependency from Russia in 2027.

So the question for you is, which are the implications for the EU security of supply and the design of the future European gas transmission networks? And probably a related question is we have seen a massive blackout in Spain. From your point of view, which are the lesson to be learned in terms of EU energy policy? And then second and third question are both related. So you can help us to understand the implications of the new deflator with respect to the your assumptions in the latest in your latest business plan.

And also the performance of the international activities continues to be very solid. You can help us to understand again which how this performance compares with your expectation at the latest business plan? Many thanks.

Stefano Beniere, CEO, NAM: Okay. Let me address the first one. Thank you, Javier. The first one regarding the security of supply and implication for the from the phase out of the Russian gas. I think we have to frame it in with respect to the total contribution that still Russian gas is providing to Europe after the, let’s say, stop of the transit through Ukraine.

Mean, generally speaking, it’s something that overs around 10%, fifteen % And I think that thanks to the most recent new infrastructure that has been put on stream like the Ravenna LNG facility, like the New Villanschaafen facility, Europe has further strengthened the let’s say the options can have to source the gas that is required to fulfill the total consumption of the country. We don’t have to forget that if you look on let’s say wide perspective, level of utilizations of the LNG terminals that we have had in the last twelve, eighteen months, you see that apart from Piumbino and Rovigo infrastructure that were fully utilized almost 100%, the rest of Europe has certain percentage with some spare capacity available. So I think Europe can progressively commit to phase out the Russian gas. Of course, let me also stress the point that this is something that relates to the existing current conditions and situation with respect to the conflict between Ukraine and Russia.

We have to see within the next two years what is going to happen with respect to that situation also to understand some if this decision will be we will stick with. But I wouldn’t be so concerned with respect to, let’s say, reaching that level. But then we know that there are a couple of countries in Europe that are contrasting this decision that is part of of course the discussion that take place all across Europe. With respect to situation in Spain, I mean, you know, being Spanish, Spain has a very peculiar situation is almost an island with respect to the rest of Europe in terms of the same interconnection with the rest of Europe, both with respect to electricity and gas. So in some way, also the implication or the lessons we can learn from that experience that need to be understood fully understood in the causes and in the let’s say in the chain of consequences we have had in the system, we have to consider the real peculiar position they have.

But in general, I mean, feel comfortable in reaffirming something that we also we pointed out during the presentation of the business plan. This transition is not linear. We need to really understand the implication and how to create or to find the new safe balancing in the system in the electricity system. And for that reason, we need to maintain certain redundancy and certain mechanism that can back up some effects that we are not prepared to tackle with or we were not expecting could happen. So to guarantee the stability and the business continuity that is required.

That means again to frame properly the capacity, the thermal capacity that can properly back up the system in this new, let’s say, situation that we never faced before and that is applied into a system that was originally designed to have a different, let’s say, mechanism with respect to production and distribution and consumption.

Luca Passa, CFO, NAM: When it comes to the second question on the deflator, Javier, basically the impact for 2024 is €52,000,000 on revenues and that is because we were estimating in our business plan 5.3% of this index, while with the recent resolution, it is 7.9%. When it comes to 2025, in the first quarter, we have recorded €10,000,000 So if you analyze this, the contribution will be €40,000,000 higher with an indexation, which is a 1.1%, which is the index for Italy. For the rest of the business plan, you should assume, I would say, a nine year contribution from this index in the region of €35 to €40,000,000 each year. And that’s the impact for the deflator. When it comes to the international associate performance, let me say that this was, at least for this year, exactly in line with budget but with a slightly different mix.

First of all, we didn’t assume in our business plan the exit from ADNOC that you might recall was expected to contribute in the region of basically 25,000,000 for the year. And we are expected to substitute that contribution with up to €50,000,000 for the third and fourth quarter when we basically close the OGE transaction, plus, I would say, minus and plus of other associates, which are marginal, with a very strong performance from the Austrian, in particular, TAG, which was expected and is actually slightly better than expected, at least for this first part of this year. Therefore, overall contribution for 2025 is expected to be, including OGE contribution, shy of €370,000,000 which was, again, what we had in budget when we presented the business plan. For the remaining of the year, clearly, we will assess going forward.

Javier Suarez, Analyst, Mediobanca: Many thanks.

Chorus Call Conference Operator: Next question is from James Brand, Deutsche Bank. Please go ahead.

Stefano Beniere, CEO, NAM: We can’t hear you.

Chorus Call Conference Operator: James Brand with Deutsche Bank, your microphone is open. James Brand from Deutsche Bank, your microphone is open. Next question is from Emanuele Oggione, Kepler Cheuvreux. Please go ahead.

Emanuele Oggione, Analyst, Kepler Cheuvreux: Good afternoon and thank you for the presentation. And thank you, Stefan, for your work both at Snam and together. My first question is on the guidance, 24 guidance 25, sorry, five guidance. As it seems that after the deal, OGE deal and also the moving parts in Q1, they seem quite the guidance seems quite prudent. So if you can add some color on this.

Then as regards the net the cost of debt, you mentioned 2.6%, so basically aligned with the previous year. I suppose that these figures guidance does not include the issue of the hybrid for up to €1,000,000,000 if I’m correct. Thank you.

Stefano Beniere, CEO, NAM: With respect to your about your first questions again 2025 guidance, let me say I think I personally think and the Board agreed on that. It’s more appropriate to leave the decision to review, eventually review the guidance to the next Board and let them to complete an adequate forecast and projection for the year so to release you what is their opinion and what will be their commitment for the year. For the second question, I leave Luca.

Luca Passa, CFO, NAM: And let me just start on the first part. As I mentioned, the deflator impact is €52,000,000 on 2024 recorded in this quarter, plus you have an expected €40,000,000 higher contribution from the ICA index on Italy for this year. So we have €90,000,000 of additional revenues coming from the resolution that was approved a few weeks ago. For the cost of debt, the expected cost of debt for the year is 2.5, and it do not include nor the potential issuance of a new hybrid for the OG acquisition, neither the existing hybrid cost because, as you know, from an accounting perspective, when it comes to hybrids, IFRS allows you to basically account them as full equity for both the notional as well as the interest payment.

Emanuele Oggione, Analyst, Kepler Cheuvreux: Thank you.

Chorus Call Conference Operator: Next question is from Antonio Alberto De Antonio, BNP, Exane. Please go ahead.

Antonio Alberto De Antonio, Analyst, BNP Exane: Hi. Thank you so much for taking my questions and thank you much, Stefano, for your opening remarks, and thank you for still taking live questions from analysts. My first question will be on your expectations of the based on the mark to market valuation of the or update of WACC and the future for the next year? What would you expect and if you expect the mechanism to be applied? My second question will be regarding the potential Russian territorial regulation.

What are your expectations in terms of timing given that as far as I know, there is no consultation paper published yet and it should be in place from next year? And finally, apologies because I know they have already repeated a couple of times, but could you repeat again the expected contribution from the acquisition of OpenGrid Europe in the last quarter? Thank you so much.

: So

Luca Passa, CFO, NAM: for the WACC mark to market according to current forwards and the period already basically recorded for the calculation of the formula, we currently are at 5.4, which is very far away from the trigger of 30 basis points. You know that today is 5.5%. Therefore, we do not expect the trigger to happen. Then for our mark to market starting in 2028, when there is the new basically WAC reset period, we still stick to 20 basis point increase in the formula based on a risk free rate above 3%, is 3.1% and account risk premium, which is at 1.1%. And this, again, is according to current forwards.

When you asked about timing for regulation, to be honest, it’s part of what I answered before. With the change of the Board of our regulator in July, it’s very difficult to assess timing. And I confirm there is no yet public consultation when it comes to the full introduction for the ROS mechanism. Therefore, it will take some time before it is discussed and then clearly applied. Then for the contribution of OGE expected for the year, again, for the third and fourth quarter, we expect between 10,000,000 and $15,000,000 of net income contribution for this thing.

That the range depends on exactly date in which we will close the transaction.

Stefano Beniere, CEO, NAM: Thank you.

Chorus Call Conference Operator: Next question is from Bartek Kubitski, Bernstein. Please go ahead.

Bartek Kubitski, Analyst, Bernstein: Thank you very much and good afternoon. And Stefano, it was a really pleasure to work with you over the last few years. So thank you very much for all that. Two or three two issues I would like to discuss. First, regarding potential inorganic growth in two aspects.

First, I wonder if you still see opportunities to consolidate the gas storage business in Italy, because I think there are still some more assets outstanding whether it’s possible to actually buy them as well? And also on inorganic growth in the energy efficiency business, last year was very difficult. This year, it doesn’t seem

: to be super good at least in

Bartek Kubitski, Analyst, Bernstein: the first quarter. Do you think there are like struggling players willing to sell the assets and you may actually manage to consolidate the energy efficiency activities as well? So that’s the first one. Second one, technical on the financial costs. And here I have two sort of sub elements.

Firstly, you are mentioning the increase in capitalization of financial costs. I just wonder what is the basis for that given the fact that the cost of debt is roughly flat, okay, small increase, but the CapEx decreased. So what is the basis for increasing the capitalization of financial costs? And I also wonder given the performance of Iturgas share price in the first quarter, How do you actually treat this? And what’s the impact on your financial costs given the convertible outstanding on Intralda shares?

Thank you very much.

Stefano Beniere, CEO, NAM: Okay. With respect to the inorganic development and the possible further consolidation on the storage capacity, I don’t think we are we will consider to buy the residual asset that is left in the country. It’s a small storage unit owned by Ital Gas Storage. We are much more now concentrated on, let’s say, optimizing the asset utilization and increasing the flexibility on those assets in terms of injections and the performance because we think we can create much more value working on that, including the installation of the electric compressors that will let us to increase exactly the flexibility of the performance of the units. With respect to energy efficiency, it’s exactly as you said.

I mean, sector last partly last year, also this year is suffering from, let’s say, the conclusion of the incentive scheme for the residential refurbishment. I think many of the players are suffering from, let’s say, some underperformance results. We haven’t seen yet options coming to the market for consolidation. We are actively looking around in case there are be interesting and fitting options because making this unit to grow, I think it’s the best way to value it. Luca?

Luca Passa, CFO, NAM: Yes. When it comes to the financial cost, the increase in capitalized basically expenses is driven exactly by the CapEx deployment and timing of CapEx deployment. That is affecting the first quarter, but will affect also the full year. Therefore, the full year, we expect roughly, I would say, a similar overall financial expenses line with slightly higher financial expenses related to debt. Those are driven not by the cost, but by the volumes or average volumes of debt throughout the year, while we expect higher basically capitalized costs throughout the year vis a vis last year.

And the two effects basically net each other. When it comes to Itau Gas, as you know, convertibles are basically two instruments together, a bond option and a bond component and an option component. Therefore, the bond component is assumed as debt. The option component has been very volatile, driven by the performance, as you said, of ItalGas and its non cash items therefore is adjusted in our net income.

Stefano Beniere, CEO, NAM: Thank you.

Chorus Call Conference Operator: Next question is from Piotr Dyachlovsky, Citi. Please go ahead.

Francesca Pizzoli, Head of Investor Relations, NAM0: Hi, good afternoon everybody. I wanted to follow-up on this capital interest element. Is there a difference how this capitalized interest when you capitalize interest on your P and L, does this capitalized interest go into a wrap or these are the two separate metrics? So when you spend investments, the regulatory accounts don’t treat it. Is there a difference in this one?

So that’s the first question. Second question, I wanted to ask you, how do you think about the implication of the country and some pricing upgrade for the WAC and for the financial kind of for the earnings generation power? Is there any implication for the WAC and cost of funding on the going forward basis? And then finally, I wanted to ask you about the hydrogen prospects. Part of your business plan for the next ten years includes the hydrogen investments.

We’ve just seen the Starcraft canceling the hydrogen investments. So even though there’s a cheapest power in Norway, they don’t see the economics work. That’s how I would interpret it. Do you still see your hydrogen investment going through? And if they don’t go through there’s a lower probability of them what’s the growth rate of the RAB without these investments?

Stefano Beniere, CEO, NAM: I’ll take the last and I’ll leave Luca for the first two. I mean with respect to the hydrogen of course now there are the economics makes the hydrogen costly even with respect to the low cost of energy in the Nordic. But as you know, the project for the hydrogen development look forward to beyond 02/1930. So at that time, we expected some developments on demand side with and exploit the opportunities of leveraging on the economies of scale to reduce the cost. Also take into consideration that the location of the production is expected to be in the Northern Part of Africa where you have plenty of sun and wind available.

Luca Passa, CFO, NAM: Also I

Stefano Beniere, CEO, NAM: think the step into the LGE that is the main player in the German market in the development of the hydrogen backbone in the country will give us even more visibility on the development in the core market for the global European demand of hydrogen. Also the decision of the recent decision and the appointment of the new economic and energy minister on the Mertz government, posing to the direction of reconfirming the commitment of the German market, Germany to develop the option of hydrogen in terms of green molecules for the decarbonization of some of the industrial sectors and part of the power generation. I think we have to be rely on this perspective demand also with respect to Italy to underpin the development of the outage to corridor. What happened in case this solution doesn’t fly up is exactly the way how we structure the business plan and created different options. I mean, if we stick with certain targets in terms of decarbonization and we don’t have the option of hydrogen for all the consumption that requires the molecules, either you keep on using gas with the carbon capture or you can keep on using gas, let’s say paying the EPS of the offsetting mechanism for the carbon emission.

So I think and that links also to the questions that Javier Suarez made with respect to the evolution of the, let’s say, appropriate equilibrium in the energy system. So I think saying what is going to be the growth in the business within ten years without any contribution from the hydrogen, I think it’s stretching too much the thoughts. But I think it’s appropriate to consider that if we don’t have that option, we have to keep and exploit the other options relying for all the consumptions that have to rely on the use of molecules.

Luca Passa, CFO, NAM: So for the first and second question, regarding capitalized financial expenses, they for storage and regasification, they fully go into the regulated asset base, while Transport, only 0.8% of the CapEx goes as basically ramp when it comes to capitalized financial expenses. Regarding the WACC, I didn’t get exactly the question. I think you were basically asking what do we expect in the change of the formula, which is basically nothing between, I would say, this WACC period up until 02/1937 and the following WAC from 2028 for basically three years besides the debt component, which moved from 66% to 100%. That is not finally confirmed. The regulator will be confirmed when we get closer to the WACC reset.

And in terms of, I would say, main variables for that year, as I mentioned before, we are expecting, according to current forward curves, a risk free rate of 3.1% and account release premium of 1.1%.

Francesca Pizzoli, Head of Investor Relations, NAM0: Okay. Now that’s fair enough. Thank you very much.

Chorus Call Conference Operator: Next question is from Davide Candela in Tesa San Paolo. Please go ahead.

Antonio Alberto De Antonio, Analyst, BNP Exane: Good afternoon, gentlemen. Thank you

: for taking my questions. And also thank you, Stefan, from my side for your great work and the important to work together. Coming to the questions, I have one related to your answer in relation to the Russian potential Russian ban, gas Russian ban. And it’s related to prices. I was wondering if you can share your view about that because this potential reduction in supply in my view could put pressure on gas prices also looking at what our oil prices are doing currently with gas and investment that could be laid.

So making all the things together, if you can share your view about that? And second question related to CO2. Was wondering if you can share the talks we and I at which stage they are particularly after any reached a milestone in U. K. For the project.

So also sharing your view will be helpful. Thank you.

Stefano Beniere, CEO, NAM: With respect to the Russian ban, let me say, I mean, of course this phase out has to go consistently with the availability of other flows. I mean, we don’t have forget and we don’t have to exaggerate to certain extent the complexities to substitute twenty, thirty BCM of gas for the entire European market. Also take into consideration what’s going to be the development of demand throughout that period. The second point to look at the prices, I mean, have to consider how the gas storages will be managed throughout the period, because as you know the more we have in the gas storages, the lower tends to be the flexibility in the market. I think that the additional capacity that has been put on stream for the LNG can let’s say cope with this reduction of Russian gas.

But let me say, this is to a certain extent it is nothing new in the sense that since the beginning, I mean, of the Russian of the invasion of Ukraine, the target for Europe was to get rid of Russian gas. We haven’t been able to do it so far because we hadn’t enough capacity to substitute completely that flows with other flows from LNG. And if you consider nowadays apart some volumes that comes through the Turk stream, all the rest of the Russian gas that is delivered to Europe is LNG. So to certain extent apart from the cost of transportation and longer I mean the different distance between the source of Russian LNG with respect to let’s say American U. S.

LNG or Qatar LNG or Africa LNG, you have basically the same mean of production of that gas. So I don’t think that that can influence much of. But then as I said, I mean, we have also to consider what is going to be the situation within the two years, in two years’ time in terms of let’s say, peacekeeping or possible peace in Ukraine that will reshuffle eventually some of the positions in the different markets. With respect to CO2, we are still the process that has been launched by ENI, the project called GELASIA. As you know, our purpose is to be part of that project contributing the 50% of the project we have in Ravenna.

Definitely the FID that was taken for the INET project will speed up the process and about the timing expected for the process who is leading the communication is definitely E and I that stated some deadlines and some expectation to that respect. What I can say is that I see more and more the solution of carbon capture gaining momentum all across Europe, not only across Europe. And there is a strong pressure for, let’s say, developing this type of solution, especially for industrial clients and industrial sectors and power generation. And I think to that extent is extremely significant to position the spend that was taken by the German government with respect to the development of CO2 as an option for that market that was not considered so far, okay? And I think when German market, UK market, let’s say Benelux market, Italian market, Greek market are looking at that solution especially for cement production, for steel production makes sense to create the critical mass for development this type of solution.

: Thank you very much.

Chorus Call Conference Operator: Next question is from James Brand, Deutsche Bank. Please go ahead.

Francesca Pizzoli, Head of Investor Relations, NAM1: Hi, good afternoon. And also from me, Stefano, thank you for your service over the last few years. Couple of questions. Firstly, on the WACC. I know there’s been a few questions already in the WACC.

Hopefully, I’m not rehashing what’s been gone through already. But there’s been quite big moves in bond yields. And I was wondering if you were to kind of mark to market the WACC today, what would that imply for next year? Would it imply a cut or similar WACC or an increase? And then secondly, just circling back on the Ittle gas converts, obviously, in the money, what do you expect in terms of conversion timeline for those?

Do you think that the convertible bondholders will wait until the end of the period, which I think is in 2028 to exercise? Or do you expect them to exercise earlier? Thank you.

Luca Passa, CFO, NAM: Thanks, James. Regarding the WAC mark to market, I’ve addressed it already before, but just to repeat it. So looking at the observation period, which has already gone from October And the forward curves, the mark to market for next year is 5.4% vis a vis the 5.5% on Transport today. Therefore, only 10 basis point of basically reduction, which doesn’t basically affect the trigger, which is 30 basis point.

And then going forward for the next regulatory period for WACC, which is 2028 and onwards, we are expecting according to the current forward curves, 5.7% on Transport, I. E, 20 basis points higher based on account release premium of 1.1% and a risk free rate of 3.1%. And this has materially moved basically since we presented the business plan. Then for the Itau Gas convert, you know how convert works. If the bondholders the convertholders try to convert before, even if the bond is in or the convertible is in the money, they will lose the time value of basically the option.

Therefore, we do not expect any convert holders to basically require conversion. Additionally, as you know, Itay Gas will be on the market with a capital increase in the coming couple of months, which means that there will be also a revision or stabilization around the stock price of the company, therefore, making the convert less in the money that it is today.

Francesca Pizzoli, Head of Investor Relations, NAM1: Great. Thank you. I’m sorry for asking question there that been asked already, but it was helpful to regather the answer. Thank you very much.

Chorus Call Conference Operator: Next question is from Marcin Wojtal, Bank of America. Please go ahead.

Francesca Pizzoli, Head of Investor Relations, NAM2: Yes. Good afternoon. First of all, also a big thank you to Stefano for his service and for interactions with the analyst community. I wanted to ask you, if you don’t mind, about regulated returns linked to green hydrogen. So do you still expect to eventually obtain a premium return versus other types of activity?

And is there already any process ongoing with Arera that is supposed to determine the methodology and the returns? Could you just please remind us what are the timelines here?

Stefano Beniere, CEO, NAM: The process for defining the allowed return for green hydrogen has not started yet. There are some, let’s say, steps to be taken with respect that, let’s say, entitles them to fully dig into. With respect to the expectation, also making confronting the situation in Germany that is the most advanced market to that respect, it’s reasonable to expect a premium with vis a vis the gas situation simply because of the implicit risk that there is in the new development of this new molecule market, the market of this new molecule. So it’s reasonable to expect. We always said that we might expect something in the region up to 100 basis points with respect to gas market.

That’s I don’t have we don’t all have other let’s say data points that can have can help to set up a different expectation.

Chorus Call Conference Operator: Ms. Petalli, gentlemen, there are no more questions registered at this time.

Stefano Beniere, CEO, NAM: So then thank you all.

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

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