Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ERG SpA (FRA:ER9, Financial) reported a 4% year-on-year increase in EBITDA, reaching EUR 319 million, driven by larger installed capacity and new asset contributions.
- The company completed significant projects, including the construction of wind farms in Sicily and France, adding substantial capacity to their portfolio.
- ERG SpA (FRA:ER9) successfully extended its revolving credit facility to 2027 with better terms, strengthening its financial position.
- The company received high ESG ratings, including a new ranking of 98 out of 100 in the GRESB rating and an AAA rating from MSCI.
- ERG SpA (FRA:ER9) is on track to reach its target of 3.9 gigawatts of installed capacity by the end of the year, with significant contributions expected from new projects in 2025.
Negative Points
- The company faced weaker wind conditions in the third quarter, resulting in lower production and a negative impact on margins.
- Adjusted net profit decreased by 13% year-on-year to EUR 130 million, affected by higher depreciation, financial charges, and a higher tax rate.
- ERG SpA (FRA:ER9) experienced a challenging market environment with lower merchant prices in several countries, impacting revenue.
- The net financial position increased to EUR 1.9 billion, reflecting significant investments, buybacks, and dividend payouts.
- The company is facing regulatory uncertainties in Italy, particularly regarding the FER decree and regional laws affecting renewable energy projects.
Q & A Highlights
Q: Can you comment on the changes in the PPA market, particularly regarding pricing and risk, and how different industries are responding?
A: (CEO) PPA prices were under pressure earlier this year but are now recovering due to rising gas prices. We have secured large PPAs with major corporates and are in discussions for more. The trend is positive as PPAs are becoming a major route to market, with auction tariffs serving as a reference for long-term pricing.
Q: How do you view future developments in the US in light of potential changes to renewable tax credits?
A: (CEO) We don't see risks to existing assets and PTCs, as retroactive measures are uncommon in the US. Our strategy involves acquiring operational assets with existing PPAs and PTCs, minimizing risk. We remain confident in the US market's potential despite political uncertainties.
Q: Can you provide an update on the outlook for 2025, including hedging prices, expected capacity additions, and market prices?
A: (CEO) We expect full contributions from new assets and a better price environment in 2025. The green incentive in Italy is expected to increase, and we have hedged over 70% of our production at prices above EUR90 per MWh. We anticipate significant EBITDA growth, assuming normal wind conditions.
Q: What is the status of the regulatory environment in Italy, particularly regarding the FER decree and regional authorization processes?
A: (CEO) The FER decree is expected to be published soon, with auctions likely in March 2025. The proposed tariff range is EUR70-95 per MWh. Regional authorization processes vary, with some regions supportive and others, like Sardinia, more restrictive. We await clarity before proceeding with investments.
Q: Could you update us on the DEA investigation and its potential impact on ERG?
A: (CEO) ERG is not under investigation. We conducted an internal investigation following a whistleblower notice and found no impact on the company. We remain confident in our compliance and are cooperating fully with authorities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
