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Omar Al Bayaty: Good evening to all the people connected. Welcome to the 9-month 2025 result presentation. Enel's CEO, Flavio Cattaneo, will open with the key highlights; and our CFO, Stéfano De Angelis will present the economic and financial results of the period. We ask those connected to the webcast to send question only via e-mail at investor.relations@enel.com. Before we start, let me remind you, media is listening both the presentation and the Q&A session. Thank you. And now let me hand over to the CEO.
Flavio Cattaneo: Thank you, Omar. Welcome, everybody. Over the past months, we continue to implement our strategy, and our result prove its effectiveness. First of all, EBITDA and net income continued to grow steadily, reaching EUR 17.3 billion and EUR 5.7 billion, respectively. We're improving asset quality and profitability, leveraging on stable geographies with high visibility of returns and a balanced risk profile. Our focus on European countries now representing 75% of group EBITDA and 90% of net income led to an improvement of the EBITDA conversion into net income. We expect this ratio will achieve 30% at the end of this year, 5 percentage point above the 2020-2022 average, also due to our share buyback program, a double benefit of investing in our industrial asset while giving an additional return to our shareholder. This continuous improvement lead to stable growth in EPS and confirming our focus on shareholder remuneration. Furthermore, as usual, we are going to distribute an interim dividend in January equal to the 50% of the guidance floor, even though the final payout in July is confirmed up to 70% of the net ordinary income. As you know, environmental sustainability remains central to our strategy with emission-free production reaching 84% of total generation. Now a brief overview of our 9-month performance across geographies. The results were driven by strong operating delivery in Spain, mainly driven by the integrated position management and in Colombia, mainly due to good water resource availability. A clear example of our attention to process and portfolio optimization is the U.S., where our commitment has led to a positive cash flow for the first time since the beginning of our operation. In addition, the renewables in other countries have been restructured and reshaped in a growth platform. In LatAm, the resilient operation offset currencies dynamics. While Italy continues to face challenges, lower water resource affected the result of our hydroelectric plant. In light of the result presented, we confirm our expectation to close the year with ordinary EBITDA aligned to the guidance and the net income slightly above the top of the guidance range. This is a clear indicator of execution and value creation. Now I leave the floor to our CFO for further details.
Stéfano De Angelis: Thank you, Flavio, and good evening to everybody. In the third quarter, the group confirmed positive and consistent economic and financial results. The limited risk exposure and the quality of our earnings are evidenced by the linear trend throughout the quarters with a net income expansion funded on a structural improvement of our asset portfolio profitability. Focusing on the delivery of our strategic pillars, the group profitability continues to be strong with net income up by 5% year-on-year, expanding the 3% growth reported in June, thanks to an improved conversion of the EBITDA, which now stands at 33%. Efficiencies continue to be front-loaded with 80% of the 2027 target already reached. Our efficiency program is part and share the same approach of the capital allocation process, representing our best and cost-free source of funds. Last but not least, on financial sustainability, net debt on EBITDA remained flat at 2.5x despite the EUR 1 billion execution of the share buybacks, which were not included in our guidance for the year. In conclusion, these remarkable results confirm once again the solidness of our business model and our balance sheet flexibility. Before diving into the results, let me show you the delivery on capital allocation. The execution of the industrial plan, I'm on Page 6, presented in November last year is progressively reshaping the asset portfolio of the group, allowing for a substantial improvement of the business performance. This is translating into a better asset quality with reduced volatility exposure and a more balanced risk return profile and an improved asset profitability, which resulted into higher EBITDA conversion into both net income and FFO. Thanks to this growing level of investment deployed in Europe, 75% of EBITDA contribution is now coming from this area. A minority dilution is limited to 9% on the European operations. At the bottom line, this translates into 90% of net income contribution coming from both Italy and Spain. This improvement is driven by coupling new investment guidance and the maximization of the value to be extracted by our asset base. I move to Page 7. Here, I show how the previous investment cycle was focused on growth in renewables capacity in Latin America and U.S. However, lower market visibility and greater market volatility and -- generate a lower-than-expected EBITDA, while the net income conversion was also affected by the higher financial cost and depreciation related to the incremental capital expenditures. On the opposite, the new investment cycle started in 2023 is focused on countries and businesses with secure and visible returns. It is proving to be more efficient and effective, delivering an improved EBITDA contribution, thanks to a more effective and efficient capital allocation and the reinvestment of efficiencies, as I said before, at zero-cost source of funding. This is clearly visible in the stronger results along all the P&L lines, implying an improved conversion of the EBITDA that is set to exceed 30% for the full year when we compare with 25% on the average 2020-'22 period. The first execution of the efficiency plan, the improved conversion efficiencies achieved in the headroom created on the balance sheet that equip us with a significant firepower to implement the share buyback programs already announced that we have on Page 8. The full actionable buybacks plan at group level stands at around EUR 6 billion and includes the total amount of the 3 different programs approved both at Enel SpA and its subsidiaries level by the corresponding AGM. About Enel program approved by the AGM for EUR 3.5 billion, we are on track to complete the EUR 1 billion tranche launched in August. And as of today, we have purchased 63% of this amount. Endesa where the program approved by the AGM amount to EUR 2 billion has already announced EUR 1 billion in 2 different EUR 500 million tranches with the second one already ongoing and having a final date, February 26. As of today, Endesa have purchased EUR 0.5 billion -- have spent EUR 0.5 billion and with an average per share acquisition cost of EUR 26.6 per share that represent 1.9% approximately of the total share capital. Lastly, Enel Américas share buyback was completed and oversubscribed with a total amount of USD 470 million. The partial was financed by the available liquidity. This liquidity is still arising from the sale of Peru from the disposal plan that we executed starting from 2022 until 2024. The operation now that is conclude and will be financially executed -- has been financially executed on the 1st of October will increment the Enel shareholder into the company into the holding Enel Américas from 82.3% to 85.7%. This brings me to say that it's worth to highlight that also the share buyback program at subsidiary level increased the Enel SpA earnings per share, thanks to the higher portion of the consolidated net income post minorities. Then the Investor Relations may make this exercise with you of calculating the percentage point of the increase. Now we are around 1% of net income post minority increase with the execution of this portion of the buybacks. On Page 9, we finally move into the economic and financial results of the quarter. As I said before, the group delivered a solid performance, improving previous quarter's bottom line performance and the trend expectations. It is worth reminding that this year, we face relevant exogenous negative effects, a stronger euro exchange rate compared to our Capital Market Day guidance, the breakout-driven increase in network ancillaries' cost in Spain. And then the program, let me say, curtailment in Brazil that is defined by the regulator without any refund for the generators. Including the impacts of these, let me say, headwinds as we call them, we would have stayed exactly in the expected growth of the budget and the plan that is plus 3%. But the reduced exposure to countries and business where we have this kind of higher volatility and sometimes unnecessary risk profile represented also by the limited contribution to the bottom line allow us to mitigate these headwinds at net income group level. Well, the limited conversion of the EBITDA exposed to these negative impacts smooth this impact that is more than compensated by the better execution, for example, in terms of bad debt and financial expenses. Finally, net income came in at EUR 5.7 billion, up by 5% year-on-year. It is important to remind that as already represented in the previous quarter, at net income level, the adjustment related to different perimeters across 2024 and 2025 includes also the sale of Slovenske that resulted in a negative noncash impact in the reported numbers of 2025 for the release of [ network reserves ] that was booked in the past related to derivatives. Remember that we have the important cash impact of taking back to Italy more than EUR 1 billion of shareholder loan and all the interest that was capitalized in the previous years. Finally, our improved organic results translated also into enhanced cash conversion, enabling us to reduce our net debt by EUR 0.6 billion year-on-year despite an additional EUR 1 billion not included in our business plan allocated to shareholder remuneration through the buyback execution and this maintaining the net debt on EBITDA ratio stable at 2.5x. I will now dive into the key highlights of the business moving to Page 10. We are talking about the grid's delivery, and it's important to highlight, as always, that we deployed a very huge amount of investment in this segment that amount to EUR 4.7 billion with an increase of 14% when we compare the same perimeter of 2025. Italy, that is the unique, I would say, regulatory framework that evolve versus the new needs in terms of network evolution in order to grant the resiliency and the support -- the adequate support to the system network security and contribution to the entire economic environment growth. This is the unique country where we already achieved the most important goal that is having a fair regulatory framework to allow us to invest, and we are ready to invest significant resources if we found other framework like this one. I'm anticipating probably some question about Spain. So it's clear that Italy gained the lion's share. So when we say Europe gained 80% of these shares, we have to also say that 70% of this amount is dedicated to Italy. The huge amount of investment boosted the value of our RAB, which has now reached almost EUR 46 billion, increasing the resiliency also and the visibility of our EBITDA for the coming periods. Finally, it's worth to highlight that as I have been questioned several times, and I don't know if this was part of the communication that you received from the analyst or from the financial market, the WACC in Italy was confirmed at 5.6%. Let's now look at the generation and supply business. In terms of capacity, our renewable asset base grew 3 gigawatt in the last 12 months, supporting the share of the renewables production on total, which remains stable at 72% as of September for the lack of resources in Italy for hydro, approximately in the year-on-year comparison, we have 1.5 terawatt hour less this year. And in Spain for both wind and solar resources and also for the relevant impact in terms of curtailment in Brazil because it's important to highlight that terawatt is not considered also in the production KPIs. We continue to deploy greenfield BESS capacity, reinforcing our leading position in storage, and we add 1 gigawatt in the last 12 months. And if we include our pumping capacity, now the full storage capacity of the group reached almost 12 gigawatt. Continuing on BESS, in the MACSE auction in Italy, we achieved a remarkable result awarding almost 70% of the total battery storage capacity auctioned with 6.7 gigawatt hour out of a total of 10. Moving to the retail segment. In our domestic market, volumes remain pretty stable at around 52 terawatt hour. Other important point, we also underline this, starting from the second part of last year, we complete the reshape of the offer portfolio and now our customer base is more resilient, demonstrated by the strong reduction in churn rate. Furthermore, our offers are now based on a sustainable price level in line with the current market price. I will now move into Page 12, and I will talk about the earnings evolution. As I said at the beginning of my presentation, ordinary net income came in at EUR 5.7 billion with a solid 5% growth that was supported by the mentioned EUR 8 billion CapEx. And this is the result of a strict but simple financial discipline and the value-driven approach that we have bring into the integrated margin management. I will now focus just in some specific topics. D&A increased EUR 100 million versus last year, but this is mainly driven by higher amortization resulting from the increased level of CapEx deployed over the year, but this was fully offset by a very positive result that was the bad debt evolution, especially in Italy that was also connected to the improvement of the -- sorry, on the churn rate, confirming a structural trend that we have observed along all the year. And already in the first half, we have a very positive impact. So the CapEx is doing its job, adding EBITDA, adding D&A. You do not see the impact at EBIT level of this additional D&A because we have the bad debt that is performing very well and reducing EUR 300 million -- sorry, EUR 300 million in Italy and EUR 100 million additionally in Spain, so EUR 400 million in the 9 months that compensate the D&A effects. Another very positive impact is financial expenses that are down by around EUR 300 million, and this is thanks to the reduction in charges on debt driven by the EUR 4.3 billion reduction in gross debt and the lower cost of debt compared to last year. Let's now move to the slide related to the FFO and net debt. I'm on Page 13. The EUR 11.1 billion FFO delivered in the 9 months implies a remarkable 64% cash conversion, which will be confirmed as [ share ] for the full year results. The FFO generated in the 9 months more than covered the deployment of organic CapEx as well as the acquisition of asset, brownfield in Spain with FFO minus CapEx being positive for EUR 2.5 billion. This net cash flow from operation, the net cash related to nonrecurring or accounting adjustment funded a EUR 7 billion shareholders' remuneration that have approximately EUR 6 billion of dividends and the EUR 1 billion approximately related to the buyback. Finally, net debt came in at around EUR 57.5 billion with a remarkable and confirmed ratio of FFO/net debt at 25% that is up by 2 percentage points versus previous year, another sound results proving the quality of our asset and very important for our rating. With this, I end my presentation. Thank you for your attention, and let's now open the Q&A session.
Omar Al Bayaty: We thank our CFO. Let's now open the Q&A session. We received a lot of question for the call that we have summarized by topic and will be answered by the CFO. The first one, share buyback program for Enel SpA. Now you are on track to complete the first EUR 1 billion. What's next?
Stéfano De Angelis: First of all, it's clear that we have today the balance sheet to execute the entire program, meaning EUR 3.5 billion approved by the AGM. Important to remind that the 18 months that is the difference, for example, from Endesa program, that is the duration of the program is the mandatory maximum duration for the Italian law. So it's not a specific decision underlying the 18 months. Clearly, the buyback is one of the option that we have to use part of the available financial flexibility. But we have to keep in mind that we have other relevant opportunity to expand the industrial asset base in order that is our fundamental goal to ensure stable and long-term earnings accretion.
Omar Al Bayaty: Thank you, Stéfano. Let's move to Italy concession extension. In Italy, we are waiting for the final document on concession extension. Any news?
Stéfano De Angelis: Not depending where you are, but the last relevant event is the ARERA Resolution in August. So we are currently waiting the decree of the Ministry of Economy. But as of now, in terms of -- you asked about the assumption. Being a decision that is not in our hands, our unique assumption -- for my unique assumption, let's call it this way, about the amount of the lump sum is what we have included in our Capital Market Day in November. And probably some of you remember that we included this amount not having still the opportunity to disclose the ongoing discussion about the scheme of the extension of the concession. Regarding the timing for the cash out, this is based on a step-by-step process whose timing is set by the government bodies because we have different actors that participate into this process that are involved. And this should target, as we always stated, the last quarter of 2026. But let me say about this topic that the value of this concession extension and the related extraordinary CapEx plan has to be considered independently from whenever and whatever will be the lump sum, even if it is a relevant element of the framework because the extension and the new and increased CapEx cap, this is really important as I have the opportunity to share with some of you, will allow us to invest more than EUR 15 billion in the next 3 years in Italy with a dramatic increase in the RAB compared to the past. Don't forget that we will have just in 2026, EUR 1 billion of grant still in our CapEx. But starting from 2027 and in 2028, we will not reduce the CapEx, the gross CapEx for EUR 1 billion, as you see in my number. So you know that the grants do not translate into RAB. So if this is EUR 3 billion or if this is EUR 4 billion, we have 3 year and a new framework that allow us to make an extraordinary level of CapEx, and we have the full firepower to realize a very significant upside in the CapEx that we will transform into RAB.
Omar Al Bayaty: Thank you, Stéfano. Let's move to Spain. Can you please update us on the latest news on regulation in Spain? And what's your view?
Stéfano De Angelis: We do not expect further updates earlier than the end of November. After that, the regulation will be finalized before year-end. Endesa has already got the access to the file, then they are still, as all the other operators, submit comments as always. We think that the changes proposed by the CMC in the latest documents do not solve the issue of effectively incentivizing the level of investments needed to accelerate the country's electrification and support the energy transition. This means that failing to establish a more predictable and adequate remuneration framework to meet this demand will mean missing a historic opportunity to enhance competitiveness, create jobs and drive economic growth. These are all topics that were part of the program of the government when we start to discuss about this topic. It's not my personal idea of Spain. But to be pragmatic, once the final remuneration framework is approved by year-end, we will be in a position to reassess if there are the condition, and we will assess also the sites for a potential upside in this CapEx plan. So we are talking about an upside. And this will happen ahead of the upcoming Capital Market Day that is scheduled for February 2026.
Omar Al Bayaty: Thank you. Next question, if you -- could you please update on hydro concession extension?
Stéfano De Angelis: There are several concession in Italy that have already expired by several years. And it's worth to remind that our concession will expire after the end of the next 3 years' industrial plan. So I can say that we expect the process will take longer time to start. It will -- this has to involve regional, national and European authorities. So it should be different from the one of the distribution. This does not mean that -- this is not a negative consideration. Because at the same time, it's a common understanding that in the present macro and geopolitical scenario, the condition that shaped the present regulatory framework need to be currently updated. Finally, what I want to say that we are not in a hurry, and I think it's not the proper time to speed up the process from our side, having the regulatory agenda already full. We were talking about the extension of the grid concession some years before of relevant topics, not just for our company, but the whole industry.
Omar Al Bayaty: One more on concession, but Brazilian one. Could you please update us on the process for the concession renewal in Brazil?
Stéfano De Angelis: But the process -- there are 3 processes that have different timing. So I will -- about the specific administrative update about the 3 processes that you can share with the -- also with the IR department. The relevant underlying discussion and evidence from our point of view, that is our point of discussion with the authorities are all pointing to the full extension of Enel concession. This is because we -- it's worth to remind that our effort in the country translates into a complete turnaround of the operation, targeting a dramatic improvement of the quality and the effectiveness of our operational processes that is joined with a gain in terms of productivity and efficiency in terms of spending. As an example, we are in-sourcing mission-critical field activities in order to improve the end-to-end management and monitoring of the network, but this is just one of the example. We are strongly increasing -- already increasing the capital expenditure and the OpEx dedicated to this turnaround plan. So despite a complex unfortunate starting point, with this approach, the present scenario drive to a full concession renewal as, I would say, also the unique scenario that we are considering today. Apart the concession topic, let me also update you on the liberalization of the retail market in the country. The government has defined the full liberalization of the retail market with a final deadline within 3 years. This means that our strong leading presence in the country should create a growth platform able to capture an incremental value creation that implying a potential but significant re-rating of our Brazilian operations.
Omar Al Bayaty: Thank you, Stéfano. One question on MACSE auction. Could you please elaborate on investments and expected return?
Stéfano De Angelis: This is the auction that -- it's in Italy, the counterparty is Terna, the TSO. We were awarded with around 70% market share of the total capacity in the auction. And as I already said in the presentation, 6.7 gigawatt hour, that is the other way of, let me say, measuring the auction level of capacity and megawatt, gigawatt hour as you prefer. The auction was based on a pay-as-bid mechanism. So you see that we have different pricing. So it's very difficult to understand an average point because you have different price for different players and for different plants. What is important is that this auction generated 15 years, 95% regulated revenues that give us full -- also to our shareholders, full visibility of the earnings stream with, let me say, I would say, a very risk profile because we have the construction, but BESS, we are the leading, I think, company. I don't know because nobody was helping me to understand this, but I think that we could be also the leader for sure in Europe and maybe also in some other continent. But I'm not joking that the execution of the construction of the BESS, we already realized approximately 2 gigawatt in Italy. So for us, this is not an element to consider a risky point. So the COD of this capacity and the EBITDA will be 2028 as based in the auction. So you will have full visibility in our next business plan and also positive impact of this CapEx in this auction.
Omar Al Bayaty: One more on auction, FER X auction. Deadline for competitive process is at year-end. What's your expectation on the outcome?
Stéfano De Angelis: If you look at the press releases that we have from the -- let me say, the administrative bodies, it's already, let me say, quite clear that we are -- first of all, we have 2 different auction. The big one baseline, let me say, auction and then we have another smaller that was dedicated to non-Chinese, let me say, components and agreements. The first one, we already understand, let me say, by the statement, the official statement from the GSE that have been awarded around EUR 60 per megawatt hour, something -- some capacity less, some capacity higher. But you have to consider that this price is adjusted for inflation. There is a full curtailment coverage, and this has generated so we have, let me say, a solar scenario. Solar was the big portion of this auction. And then there is an additional component in the price that is -- that depends from the geography. You have EUR 4, if I'm not wrong, plus in the center of Italy and EUR 10 plus in the north of Italy. This is not adjusted by inflation. So at the end, you have something that is in the range of EUR 65. In some cases, you have more than EUR 70. Again, that for the EUR 60 average of the base auction will be adjusted for inflation. In the other auction, we do not have any statement. We have to expect a price that reflects the spread of the market price against the Chinese prices, something that could be in the range of EUR 5, depending if you have the Indian one or something more. But in the second auction, we do not have the official statements that we have for the first one.
Omar Al Bayaty: Thank you, Stéfano. Let's move to CapEx evolution. Do you see opportunity to invest more in renewables? In U.S., in particular, how many megawatts you already lock in?
Stéfano De Angelis: Maybe also kilowatt. But again, I think that the market now should start to understand our behavior. It's not just U.S., it's not just Italy, it's not just Germany. It's a question of investing where you have a scenario that have, let me say, a balanced risk rewarding profile. This means that in Italy, we have a different approach than in Spain, for example, it's not just Europe because in Spain, now we are very long in terms of generation. In Italy, we are dramatically short as a country and as Enel. So the approach is different. But at the end of the game, it's the same because in Italy, we could be more aggressive in terms of pricing, let me say, expectation. In Spain, clearly, we have very low expectation because when we look at the market of the PPA with solar, it's not a country where you can imagine today to have a merchant photovoltaic plant to be built in the next months and the next couple of years. Moving to the U.S., it's really an interesting country because it's, first of all, one of the country that is in our scope, and you know that in our scope, you have a country when the -- also the market scenario, the geopolitical scenario and the regulatory scenario is, let me say, visible and let me say, less volatile. The safe harbor discussion, it's important. But at the same time, it's also important to consider that U.S. is a market that is growing. And this growth is visible today, is already visible in the price of the PPAs. It's already visible in the price also of the market, the different markets. And when I say different market, it's more visible in the PJM that in the [ SPP ] or something like this. So the approach remain the same. In U.S., we have a pipeline that should present some interesting safe harbor greenfield opportunity. To transform this opportunity into a positive final investment decision, we are already having discussion about PPAs because it's clear for us that if we are going to build a greenfield plant in the U.S., we will have a signed PPA at the day of the final investment decision. And this is part of the evolution that we are carry on in these months.
Omar Al Bayaty: Thank you, Stéfano. Now let's move to guidance. First question regarding EBITDA guidance. Could you please run us through the trend of the last quarter of the year?
Stéfano De Angelis: As I -- also last year, I insist, let me say, that utilities should have also, let me say, an annoying trend. And so my annoying answer is that the trend will be the same that we have observed along this quarter. So Europe will have an Italian pro forma that will be, let me say, almost flat year-on-year. And Spain will have a pro forma that will be more or less 5% growth year-on-year. That is exactly the figure that we have in September. It's clear that in South America, we have, let me say, a more, let me say, volatile trend, also considering the FX. So we expect a different -- a recovery, let me say, in LatAm that will be driven by the confirmed positive performance of Colombia, where we have -- is the unique relevant country in the region that do not have a negative FX. And the positive rebound in Brazil, the rebound that will be in the integrated margin will depend on 2 specific point. The first is that the FX impact should reduce because last year, 2024, the euro start to strongly appreciate against real in this period, let me say, in the fourth quarter of the year. So let me say the year-on-year comparison will benefit from a worse 2024 in the last quarter of 2024. But the most important topic because it's a very important industrial change that we will book probably if nothing changed in terms of process in respect expect to the positive impact of the curtailment refund in line with the decree that was approved recently by the Brazilian government. As you know because I read a lot of daily news from the investors, from the analysts, this is not what I would say you were expecting because we were expecting this, it's very difficult to expect that the excess of capacity, it's refunded. When the network operator cut for -- with the programmed cut for security reason. So it's a programmed cut not for a temporary excess of generation, but it's in order to secure the transmission and the network system. In this case, we were expecting strongly to be refunded and the decision is, let me say, positive as again, I [ wrote them ] this is also our position, the generated distribution shouldn't be, let me say, impacted by the definition because it's the reason why we have that kind of congestion in Brazil. So -- but this is something that could be introduced also in the final word of the law when transformed into law. So the impact is not hundreds of millions. It's something that, let me say, bring our performance in line with our expectation because the amount more or less will cover the full impact of the curtailment that is the one generated by the -- let me say, by the programmed cut from the TSO and the other is the real congestion that, in our opinion, is something that is, let me say, a long-term strategy from the -- of this energy system because that kind of evolution in the distributed generation was -- should have been managed some years ago probably. But again, don't move from the positive reaction that we had. So Brazil will driven by these 2 specific FX that will not change, let me say, the trend of the LatAm business dramatically, but we will move from a flat to a low -- no, let me say, to a single-digit growth in the specific fourth quarter results. This is our expectation.
Omar Al Bayaty: Thank you. Stéfano, one more on guidance, net income guidance. On net income, you guided slightly above the guidance range. To which extent do you expect to exceed the guidance?
Stéfano De Angelis: Let me say, I think that I gave all the elements that have the translation of the EBITDA into the net income. So I will just, let me say, refer to something that is not related to the EBITDA because the mix of the EBITDA will have a negative -- let me say, a slightly negative impact on the minorities. In terms of seasonality, also last year, we had, let me say, a different quarter in terms of economics last year, but you have to consider that there is also a concentration, as always, of the CapEx that you probably remembered also impact. So I probably answered the question of the working capital in this moment that how you expect to recover the working capital because the CapEx concentration, it's a historical that nobody will be able to remove from also all the industries that have this intensity of CapEx. So this will be -- let me say, again, we are a very utility. So the linear trend will continue, excluding this change that we have a higher, let me say, share of depreciation and a slight increase in minorities because -- due to the positive improvement of the LatAm operations.
Omar Al Bayaty: Thank you. Let's move to hydro. The hydro production in Italy is down 1.5 terawatt hour year-on-year. What's your expectation for the last quarter? And any visibility on 2026?
Stéfano De Angelis: First of all, I think it's very important to keep in mind that 2024 was -- if I'm not here by 20 years, but probably the best year in terms of [ hydraulicity ] in the story of the hydro in Italy. So when you see year-on-year comparison, you not to worry about also our plan because we never make a plan with the historical high. We are always in an average. So we were expecting this trend. In this moment, Italy is not improving. So we will not recover. I will tell you that we will recover the 2024 condition. And to have full visibility, we have to wait still some weeks in order to have, let me say, a first visibility on the first part of 2026. But it's important also the 2026 in the Capital Market Day, industrial plan was defined based on an average hydro resource in Italy as in the other countries.
Omar Al Bayaty: Thank you, Stéfano. Let's move to retail. It looks like you recorded a drop into retail clients in Italy and Spain. What is the churn? And what are the main drivers?
Stéfano De Angelis: But unfortunately, it's in this quarter, something very strange happened because we talk about churn reduction, and you see the drop of the customer base. The churn is confirmed at the significant lower level compared to last year. And this is what we were expecting because all the -- also repricing that we performed in the last -- until the first part of 2024, this process was completed by the end of first half 2024. And this started to give us improvement of the churn that now is very solid and clear. But another important thing happened in one day that was that in the 1st of July, we have millions of customers moving from one side to another because we lost millions of customers from the regulated base, and we gained in one day approximately 1 million customers. So now we are -- like-for-like this is a change that is real, let me say. The other one also was real because that customer was not in the free portion of our customer base. And this is also important to look at the volumes, let me say, in the reported figures because starting from this quarter, in one day, we lost also the terawatt hour of the -- when you look at the total figure of the terawatt hours sold in Italy, in one day, we lost millions of customers, so some terawatts generated from the so-called [ tutti i lati ] customer base that was in a specific company, and you probably know the story that is not so fantastic...
Omar Al Bayaty: Okay. Thank you for your answer. D&A were almost flat year-on-year despite the new investments. Which are the drivers?
Stéfano De Angelis: Again that we gave the trend -- the industrial trend of the asset is that we have an increase in the D&A because of the increase in the investment plan. Keep in mind that in the past, you have the figure that was also reporting the disposal plan. So when you see the asset base and the depreciation, when you sell an asset, you sell also the depreciation with the asset base. So now that we are trying to be more stable and comparable, now the pro forma is limited to Peru and Lombardy. When we look at the industrial part of the comparison, we will start to see the increase in the depreciation that is, let me say, organic. But fortunately, as I said before, we have the strong reduction in the bad debt that you will see in the same line, if we don't move into a scheme that have, let me say, an open description of the D&A figures in the simplified P&L.
Omar Al Bayaty: One question on data centers. It's a business opportunity for you?
Stéfano De Angelis: Yes. As presented 1 year ago, this is part of our additional growth opportunity. As of today, we are working on a specific pipeline of industrial sites through a dedicated full-time organization set at the beginning of last year. The specific business opportunity is represented by the sale of time to market. What does it mean? A value that is embedded in the industrial site where we can offer real estate permitted and ready-to-use energy network connections and facility services on top of a power PPA with a premium above this business model that is different from a spot sale model, we are finalizing the first preliminary agreement in Italy, where we have several potential sites in our pipeline.
Omar Al Bayaty: Thank you, Stéfano. Let's move to financial expenses. What is driving the improvement in financial expenses versus plan expectation?
Stéfano De Angelis: Because none of you -- I was thinking there is a different -- because already I think I answered through the presentation, and we have also included this EUR 4.3 billion reduction in volume effect. And then we have -- let me say, we have to consider the short-term and long-term part of the debt. But let me say, generally speaking, we have also an important reduction in the cost of debt, also thanks to the new mission of the last, let me say, 24 months.
Omar Al Bayaty: Okay. Thanks for the clarification.
Stéfano De Angelis: Sorry, before -- somebody that was on the line that I didn't respond about -- I didn't answer about Spain. I just talked about Italy. Spain is a completely different market. I'm referring to the retail churn. In Spain, we have a dramatic churn. What is important that we started to have, let me say, a different approach to different segment of the market on the sales channel. So when you see the positive results that we have in Spain because we don't want to do fight for customers just for an absolute figures of invoices. And the result is negative when you look at customer base, but if you see the trend also comparing us to other peers in the generation supply, let me say that we have a quite -- slight better trend comparing year-on-year. So we expect this to be also something that is an example because the churn in Spain is structurally average churn at 25% that I never seen in my life also in telecommunication sector. For example, that the churn has destroyed also entire groups of companies, but 25% in Spain that have the lower price wholesale in Europe is something that depends on specific behavior on some specific player that it's important not to follow because they are not creating value in that market. This is important to [indiscernible].
Omar Al Bayaty: Thank you, Stéfano. Let's move to working capital.
Stéfano De Angelis: I said before that I already answered working capital. It's -- again, the seasonality is always -- last year, I say that we will recover, and we recover. So you have to start to trusting me about working capital. But also because I remember perfectly last year that I said I have the invoice, the visibility, the short-term visibility of our business is very high, very, very high. So the working capital is something that is -- if you have some change because you decide to have some change from the forecasted amounts. So don't worry about the working capital.
Omar Al Bayaty: Okay. Thanks, Stéfano. There are no more question. So the Q&A session is over. We cover all the main topics. But if something is missing, the IR team is available for follow-ups after the call. Thanks to everybody.
Stéfano De Angelis: Thank you, and see you maybe somewhere before Christmas, different happy Christmas because this time, we will see for the Capital Market Day, not in 2 weeks, but in 3 months. Bye-bye.
Omar Al Bayaty: Thank you.