A2A, 22 billion for the transition. And renewables already beat fossil fuels

(Il Sole 24 Ore Radiocor) - Renewables outperforming fossil fuels. A challenge considered by many to be titanic and that instead in some utilities has already become reality. Among these there is certainly A2A, which considers the ecological transition the cornerstone of the Group's strategy, with the two pillars Circular Economy and Energy Transition guiding a 22 billion euro investment plan (of which six for the circular economy and 16 for the energy transition) over twelve years, focused on infrastructure, people and businesses, decarbonisation and future-fit development. "For the first time in A2A's history," explained CEO Renato Mazzoncini, "the production of renewable energy, which for us means hydroelectric, wind and photovoltaic, has surpassed production from fossil fuels, which for us are gas-fired power plants." An overtaking achieved in the first quarter of 2024 and made possible - as well as by the super performance of hydro - by the ability of the group controlled by the municipalities of Milan and Brescia to deploy resources and plan investments to contribute significantly to the country's decarbonisation process; it is no coincidence, in fact, that over 70% of the investments planned by 2030 are authorised or are already in the process of being authorised; furthermore, 78% of the investments are in line with the EU regulation on taxonomy. At the same time, A2A's path in Sustainable Finance continues, which was further strengthened in 2023, with the share of Esg debt in total debt reaching 70%. The financial strategy outlined in the plan will allow to increase further the weight of sustainable finance to over 80% in 2026, over 90% in 2030, reaching only sustainable debt in 2035.

A2A's commitment to the Energy Transition takes concrete form with 16 billion euros of investments to promote the electrification of consumption and the development of the electricity distribution network, renewables and flexible energy. In the electricity distribution sector, A2A will soon concretise a dimensional growth through an extraordinary operation of about 1.2 billion euros, for the acquisition of a large part of the network in the province of Milan and, in the Brescia area, in Valtrompia: 17 thousand kilometres of electricity network, on which 800 thousand Pods (i.e. supply points) and 60 primary substations are located. The deal will also allow a larger investment of about EUR 1.4 billion by 2035 on the electricity distribution network. The deal is part of the general strategy for the development of electricity networks, which envisages 4 billion euros of capex over the plan period, which will allow A2A to generate 500 million euros of ebitda by 2035. In this way, Mazzoncini explained, "we will consolidate our position as Italy's second largest operator and among the first in Europe for distributed electricity. We will be able to create sustainable value by ensuring financial solidity and returns to our shareholders'. The new perimeter outlined and the associated investments will allow the Rab to increase from EUR 1 billion in 2023 to EUR 3.4 billion in 2035. "Our goal," stressed A2A's number one, "is to continue to contribute to the country's decarbonisation process through concrete investments to support the electrification of consumption, the development of renewables, the closure of the waste cycle and improve the efficiency of the water cycle."

From a financial point of view, the business plan predicts an ordinary ebitda growth to EUR 2.2 billion (from EUR 1.9 billion in 2023), to EUR 2.6 billion in 2030 and above EUR 3.2 billion in 2035. Ordinary net profit shows a growth trend consistent with the trend in operating margins, from EUR 0.6bn in 2023 and 2026 to EUR 0.7bn in 2030 and higher by EUR 1bn in 2035. The Cagr 2023-2026 growth rate, net of the scenario effect on 2023, is 10%, while the corresponding value for the period 2023-2035 is 7%. The dividend policy is also on the rise. A2A expects a sustainable growth in dividend per share of at least 3% per year over the plan period. In 2023, the company led by Mazzoncini saw the distribution of a 6% increase in coupons compared to what was distributed last year in 2022. Furthermore, the plan confirms the Group's focus on a balanced and sustainable capital structure aimed at maintaining A2A's credit profile at a solid investment grade. The Pfn/Ebitda ratio is expected at a level always below 2.8 times (to then fall below 2.4 times at the end of the Plan), respecting the Group's debt capacity.

The combination of environmental and financial sustainability also emerges from an analysis of the first-quarter accounts, which saw a net profit reach the record threshold of EUR 294 million, up 70% compared to the same period last year. Numbers that allow the group to raise its 2024 guidance in the range of 650-670 million for ordinary net profit and 2.08-2.12 billion for ebitda. All this is supported by the increase in the retail customer base, which rises by 454,000. Investments remain stable at 220 million and are destined for the development of photovoltaic plants, the expansion and efficiency of networks to support decarbonisation and the circular use of resources. On the other hand, the net financial position stands at EUR 4.75 billion (EUR 4.68 billion as at 31 December 2023), which allows for a reduction in the mol ratio of 2.2 times.

The group's accounts were mainly driven by two sectors: generation, which recorded gross margins of almost 300 million euro (+66%) thanks to hydroelectric volumes doubled (+140%) as a result of record snowfall and rainfall; and the market component, i.e. the sale of electricity and gas, which jumped to 135 million euro (+81%) in margins. This is a trend that has also been seen in other large Italian utilities that are exposed to these two business segments and which has taken A2A's numbers to levels never seen before. Suffice it to say that until a decade ago a net profit of EUR 300 million was the spoils of an entire financial year. The strong thrust of renewables is also confirmed by the latest figures released by Terna, which show a growth of 51.2% in April (against 36% in 2023). Once again, the main driver here is hydroelectric power, which saw production triple to 197.5%; and photovoltaic power (+19.5%), in turn boosted by an increase in operating capacity. Capacity which, with regard to all so-called green assets, grew by 2.35 Gw in 2024 (+45% compared to a year ago).