August 2023

Amid rising inflation and higher interest rates, the optimization of the financial structure and the minimization of the debt cost over the Plan’s period are a strategic priority for Italgas, to enable the execution of investments and the remuneration of shareholders.

At the end of June Italgas boasts a cost of debt of c1.4% and a fixed-rate debt ratio of around 91%. This is an outstandingly efficient financial structure, which will allow the Group to face the new macroeconomic context from a strong position, leveraging on a well-spread distribution of maturities over time and a limited exposure to interest rate changes.

In anticipating the short-term needs dictated by the new scenario, Italgas recently issued a 500 million euro bond with a 9-year maturity and a coupon of 4.125%.

By pursuing initiatives aimed at optimizing its financial structure, at the end of the Plan Italgas expects to have a cost of debt of 3% and a floating-rate debt share of around 30%: this would allow the Group to maintain a balanced structure and a low risk profile for the entire Plan period.

Italgas also expects that, thanks to a high operating cash flow, the Net Debt-to-RAB ratio of gas distribution, which temporarily increased to 65% following the acquisition of DEPA Infrastructure, will settle around 60%: in line, therefore, with credit agency requirements to maintain the ratings in a solid investment-grade area.

Indeed, Italgas expects that significant operating cash flows generated over the Plan’s period will be able to fully cover both organic capital expenditure and dividend payments, while also maintaining the FFO-to-Net Debt ratio well above the 10% level – another discriminating threshold set by rating agencies to recognize that the corporate debt is in the investment grade area.

Therefore, Italgas would continue to have adequate financial flexibility to pursue external development – through new M&A deals and participation in tenders – and to remunerate shareholders.

Dividend policy allows shareholders to benefit from the business growth, being protected by a guaranteed minimum growth of 4%

In the new 2023-2029 Plan, Italgas’ Board of Directors extended the dividend policy to 2026, aligning it with the previous one, in force since 2020.

The new policy provides that that shareholders will receive a dividend equal to the higher of:

• 65% of adjusted net income per share. or
• a minimum base of 0.317 euro, which is the amount resulting from the DPS 2022, increased by 4% annually

Over the past three years, Italgas has already proven capable to offer a greater remuneration than the minimum one. For the 2020 financial year, Italgas distributed a dividend of 0.277 euro, an increase of 8.2% compared to the previous year: therefore, at a rate double the 4% per annum provided as the “floor”. For the 2021 financial year, Italgas then distributed a dividend of 0.295 euro, up 6.5% compared to 2020, while the 2022 dividend of 0.317 euro was up 7.5% compared to the previous year.

2026 and 2029 targets

In the new Plan, Italgas presented its financial targets over a seven-year horizon (2029), with an intermediate target to 2026.

The achievement of these targets will be driven by planned investments and will benefit from the contribution of the newly-acquired DEPA Infrastructure, from the concessions that will be awarded through tenders, as well as from the development of the water business and energy efficiency.

Over the Plan period, the weight on consolidated EBITDA of the gas distribution business in Italy and Greece is expected to decrease, from 95% in 2023 to 83% in 2029, against an increase in the contribution of the ESCo and water business (from 5% in 2023 to 8% in 2029) and of the concessions that will be won over time through gas tenders (9% of total EBITDA in 2029).

In the 2022-2029 period, Italgas therefore aims to achieve a CAGR of 8% in terms of both Revenues and EBITDA. This growth rate can be translated into in a similar CAGR for Net Profit, leveraging on a strict financial strategy.