Business Outlook

ERG is continuing with its strategy of international development in Wind and in the programme for the Repowering of its own wind farms in Italy, within the new complex and difficult context created as a result of the COVID-19 health emergency.

The main social and economic implications of the crisis concern the downward trend in energy prices and the smooth running of the activities of public administrations and those of the industrial and financial operators with which the Group regularly interacts.

In view of the above, expected outlook for the main operating and performance indicators for 2020, taking into account that the results for the first half of the year are in line with the expected outlook in the previous interim report as at 31 March 2020, is as follows:
  • Wind
    The result abroad will be higher than in 2019 due to the better wind conditions recorded in the early months of the year, albeit with reduced prices, particularly in Eastern Europe, and the contribution of the higher installed capacity, including the newly-acquired wind parks in France (38 MW).

    In Italy, EBITDA is, on the contrary, expected to be lower than in 2019, due to the lower wind speeds recorded in the first part of the year compared with the particularly high values in 2019, as well as the unfavourable price scenario, partly offset by the higher incentive prices and the price hedging actions.

    Note also the exit of a further 26 MW from the incentive system at the start of the year. The total EBITDA of the Wind sector is expected to be lower than the previous year.
  • Solar
    Solar: EBITDA will benefit in 2020 from some synergies deriving from the optimisation of the Energy Management portfolio, and from the in-sourcing of some activities previously carried out by third parties capitalising its own industrial competencies in the operating consolidation of the managed assets.

    The EBITDA for the entire year 2020 is forecast to grow with respect to 2019.
  • Hydroelectric
    Hydroelectric: EBITDA is estimated taking into account the low water availability recorded so far, with 2020 volumes expected to be lower than the ten-year statistical average and in line with the particularly low volumes in 2019; these volumes will benefit from the incentive on around 40% of the amount but at a higher price than in 2019.

    In addition, actions to optimise Energy Management on energy markets will continue with the aim of containing the negative impact of the price scenario despite the hedging actions already carried out.

    Therefore, EBITDA for the hydroelectric sector is expected to reduce slightly compared to the values of 2019.
  • Thermoelectric
    Thermoelectric: the forecast for the 2020 result will be affected, compared to 2019, by a lower price and margin scenario, even after the hedging actions on the Clean Spark Spreads, as well as by the contraction of the volumes of energy efficiency certificates as a result of the exit of one of the two modules of the plant from the high-efficiency cogeneration period.

    In particular, in the second half of the year, results are expected to be in line with those of the first half of the year which benefited from insurance reimbursements and payments relating to site contracts.

In particular, in the second half of the year, results are expected to be in line with those of the first half of the year which benefited from insurance reimbursements and payments relating to site contracts.

Overall, EBITDA is expected to contract relative to 2019. For financial year 2020, the consolidated EBITDA guidance reported in the previous quarter is confirmed, estimating an overall result in the range of EUR 500 to 480 million.

Capital expenditure costs for 2020 relate mainly to progress in the construction of greenfield projects relating to the parks that will come into production in 2021/22 in Great Britain for approximately 200 MW, in Poland for 36 MW and in France for 50 MW; also included are the initial capex for plant modernisation activities and the simultaneous renewal of the High-Efficiency Cogeneration (HEC) qualification for module 1 of the CCGT, the above-mentioned acquisition of 38 MW in France and the usual capital expenditure for wind farm maintenance.
The amount is lower overall than that of 2019, characterised by significant M&A transactions and will be within the range of EUR 150 and 180 million, confirming the guidance communicated last quarter.

Cash generation, taking into account the EBITDA and capital expenditure mentioned, will reduce year-end indebtedness, which will be in a range of between EUR 1.35 and 1.43 billion, confirming the guidance communicated last quarter. This result will be reduced compared with the EUR 1.48 billion at the end of 2019, also due to lower financial expenses thanks to the full effects of liability management operations after the issue of the Green Bond in 2019.