Release Date: May 15, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ERG SpA (FRA:ER9, Financial) continued to deliver on its strategy despite challenging wind conditions, focusing on value over volume through selected M&A and organic developments.
- The company signed three long-term Power Purchase Agreements (PPAs) in Italy and the UK, stabilizing revenues in a volatile market.
- Three projects in Germany, totaling 40 megawatts, were awarded a 20-year one-way Contract for Difference (CFD) tariff, ensuring long-term revenue stability.
- ERG SpA's financial solidity is reflected in its long-term rating of A- with a stable outlook, highlighting the robustness of its business model.
- The company approved a dividend distribution of EUR1 per share and authorized a potential share buyback plan, demonstrating a commitment to shareholder returns.
Negative Points
- The first quarter EBITDA decreased by 12% year-on-year to EUR145 million, primarily due to extraordinarily weak wind conditions across Europe.
- Adjusted net profit fell by 37% to EUR49 million, impacted by lower EBITDA, higher depreciation, and increased financial charges from new assets.
- Net financial debt increased to EUR1.9 billion, driven by cash generation offset by investments and ordinary working capital dynamics.
- The company faced significant production declines in key markets like Italy, France, and Germany due to persistently low wind conditions.
- ERG SpA's exposure to market volatility is evident as 80% of its volumes are covered by PPAs or CFDs, limiting the ability to capitalize on higher market prices during low production periods.
Q & A Highlights
Q: Can you elaborate on the guidance for the second quarter, considering the continued weak wind resources? What are the main drivers for the top and bottom of the guidance range?
A: Paolo Merli, CEO: The guidance already accounts for the low production in the first quarter. April and early May were below historical averages, but if wind conditions align with historical averages moving forward, we are confident in approaching the midpoint of our guidance range. To reach the upper part of the range, we would need windiness above the historical average, assuming a partial recovery in the second half of the year.
Q: What is your policy for participating in the upcoming FER Decree auctions, and what level of competition do you anticipate?
A: Paolo Merli, CEO: We expect the auction to take place before summer, likely in June or July. We plan to participate with three projects totaling around 150 megawatts. We anticipate a competitive auction due to the long wait and the limited megawatt target set by the ministry. Our approach remains value over volume, submitting projects at a CFD level consistent with our targets.
Q: Can you provide an update on your approach to the 1 gigawatt pipeline in the US, considering recent tariff proposals and regulatory changes?
A: Paolo Merli, CEO: Our approach in the US remains unchanged. We aim to buy fully secured assets, focusing on geographical diversification. We are not in a hurry and will wait for the right conditions. We have a partnership with Apex and are working on finding a meeting point between supply and demand.
Q: How should we model the networking capital for the rest of the year? Will it follow a similar trend as the first quarter?
A: Paolo Merli, CEO: The movements in networking capital were specific to the first quarter due to CapEx and project construction. We do not expect similar movements for the remaining part of the year.
Q: What is your view on the recent Italian regulation regarding regional autonomy in renewable installations, and how might it affect your operations?
A: Paolo Merli, CEO: The recent court rulings favor operators, challenging regional laws that restrict renewable installations. While we are pleased with the rulings, the process is time-consuming and creates legal complexities. Permitting is not our main priority; instead, we focus on finding the right business cases for our projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
