A positive set of results and significant investments
In the first nine months of 2021, Italgas demonstrated the solidity of its industrial capabilities and its committed effort to achieve the energy transition targets set by the EU and the National Recovery and Resilience Plan. While continuing to execute its significant investment program, in a context of gradual economic recovery, the Group achieved double-digit growth in net profit, while maintaining a balanced and efficient financial profile. Therefore, on the back of nine-month results Italgas can confirm its financial targets for full-year 2021 and continue along the right path towards achieving its ESG targets for 2027.
During 2021, Italgas effort to become the first utility in the world with fully digitalised assets continued, through a challenging investment plan. The effectiveness of Italgas’ strategic choices is confirmed by the uninterrupted growth of its financial results, even in a complex scenario such as that caused by the pandemic.
In the first nine months of 2021, Italgas recorded a 2.8% increase in total revenues, which reached €1,005.7 million despite the negative impact of the reduction in tariffs under ARERA Resolution 570/2019 for the 2020- 2025 period.
The main drivers of revenues were the significant increase in RAB (Regulatory Asset Base) and services to clients, as well as the strong expansion in the energy efficiency business of Seaside.
Therefore, more than half (+€14.2 million) of the total revenue increase of €27.7 million came from other revenues and 48.7% (+€13.5 million) from regulated revenues.
Italgas also achieved tight control over operating costs, which fell by €7.0 million (-2.7%) compared with the first nine months of 2020, resulting in an increase in EBITDA of 4.9% compared with the same period of the previous year.
EBIT – which reached €430.6 million, growing faster than EBITDA – was up 7.3% compared to the same period in 2020, against a negligible change in depreciation and amortization of €5.5 million. Higher depreciation and amortization due to the investments made were partly offset by lower depreciation and amortization for the installation of new smart meters (€1.1 million vs. €14.8 million in the first nine months of 2020), as the program is coming to an end.
The Group’s adjusted net profit stood at €273.6 million, up 10.5% compared with the same period in 2020: a result that reflects, in addition to the positive EBIT trend, the benefits of the liability management transactions that led to an average cost of debt of around 1%.
The strong cash flow generation covers most investments, which exceed €600 million
With a sharp increase in cash flow from operations (+21%), Italgas can fund the high level of capital expenditure and the distribution of 2020 dividends, while maintaining a solid financial structure.
During the first nine months of 2021, Italgas investments amounted to €612.6 million: 10.3% above the 9M 2020 Capex, which was €555.2 million. In the first nine months of 2021, Italgas laid down 545 km of new pipelines. In Sardinia, where the network reached 860 km, with the extension of additional 62 km in the period, Italgas has completed over 80% of the methanization plan. Investments in digitalization accelerated, with the installation of devices that enable the acquisition of data for the remote control and monitoring of network and plants. This type of investment also includes 645,000 new meters, 276,000 of which related to the replacement of traditional meters, if we exclude the affiliates.
Overall, there are 7.8 million smart meters installed as of 30 September 2021: a figure that represents 91.2% of the total number of meters and basically 100% of those in use.
The significant investments made in the first nine months of 2021 entirely absorbed the Cash Flow from Operations, which amounted to €533.7 million, up 21.0% compared to the first nine months of 2020, thus generating a negative Free Cash Flow of €57.1 million including IFRS16 effects. After the cash out for M&A (- €4.0m) and the distribution of FY2020 dividends (€241.4 million), the increase in Net Financial Debt was of €302.4 million. Considering then the impact of the initial debt of Isgastrentatré – a company controlled by Medea, whose capital was 100% acquired, in view of the merger – the Net Financial Debt of Italgas at the end of September 2021 stood at EUR 5,005.4 million, i.e., EUR 4,987.1 million excluding IFRS16 effects.
The Group has a solid and efficient debt structure, both for its maturity profile and the high concentration (94%) of fixed-rate debt, which ensures low exposure to interest rate volatility. In addition to its limited refinancing needs, Italgas can count on cash and cash equivalents amounting to a total of €676.0 million. The cost of debt, below 1%, is one of the lowest in the sector. In October 2021, Italgas also closed two three-year fixed-rate bank loans, linked to the achievement of sustainability targets, for a total amount of €500 million.
Both the two sustainability-linked loans and the inclusion in the MIB ESG Index are the outcome of the results that Italgas is achieving on its path to reach the 2027 targets set out in its Business Plan. Results also proven by the main ESG indicators that Italgas released for the first nine months of 2021:
ESG KPIs (Scope I and Scope II):
• 56,239 km of network inspected (+14.3%)
• Fugitive emissions/gas injected into the network: 0.092% (-4.1%)
• Fugitive emissions/km investigated: 105 Smc/km (-6.7%)
• km travelled by operative vehicles: 32,091 milioni km (+15.3%)
• km travelled by bifuel operative vehicles powered by CNG: 92%
• Grams of pollutants per km travelled by the car fleet: NOx (-5.6%), particulate matter (-22.6%)