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Operator: Hello, and welcome to Snam's 9 Months 2025 Consolidated Results Conference Call. My name is Zach, and I will be your operator on today's call. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Francesca Pezzoli, Director of Investor Relations, to begin today's presentation. Please go ahead.
Francesca Pezzoli: Good afternoon, ladies and gentlemen. Welcome to the presentation of Snam consolidated results for the first 9 months of 2025, which were approved by the Board earlier today. I'm here today with Luca Passa, Snam Chief Financial Officer. Luca will walk you through the key market trends, the latest regulatory developments and the main industrial and financial achievements of the period. He will then provide a detailed review of our financial results, and update of our full year guidance and a few closing remarks. After that, we will open the floor for your questions. With that, I'm pleased to hand over to Luca.
Luca Passa: Thank you, Francesca. Good afternoon, everyone. Let me start with the key trends in the Italian gas market during the first 9 months of 2025 at Page #2. Gas demand in Italy was above 44 billion cubic meters, a 2% increase compared to the same period last year. Residential and commercial sector was up 2%, largely due to slightly colder weather condition, while industrial demand was broadly stable. The thermoelectric sector grew by more than 2%, driven by lower electricity imports and reduced hydroelectric output due to the lower rainfall compared to the same period in 2024, partially offset by weaker power demand. This confirms the critical role of gas-fired power generation in balancing the energy system, especially as we integrate an increasing share of renewable energy. Exports have also risen sharply, growing roughly 5x compared to the previous year, mainly through outflows from Tarvisio also driven by a decreasing TTF PSV spread differential becoming negative during September and October. Storage levels at 92%, well above the European average. Looking at supply flows, we have seen a notable shift. Pipeline imports decreased by 2.8 billion cubic meters, more than offset by liquefied natural gas imports, which rose by 4.2 billion cubic meters, a significant 38% increase year-on-year. This growth was supported by the full return to operation of the OLT terminal in Livorno and the start-up of the new terminal in Ravenna. As a result, LNG accounted for over 30% of Italy's gas imports. This contributes significantly to the enhancing both the country energy security and the diversification of supply sources, which is crucial in today's complex geopolitical environment. These dynamics highlight the relevance of a flexible and diversified infrastructure to ensure energy stability and system resilience in an increasingly volatile and interconnected environment. Let's move to the key financial highlights on Slide #3. We have delivered sound 9-month results despite persisting volatility. Adjusted EBITDA of EUR 2.227 billion is up 6.6% year-on-year, driven by growth in regulatory revenues. Adjusted net income at EUR 1.096 billion grows double digit year-on-year, thanks to higher EBITDA and greater contribution from the associates, only partially offset by higher depreciation and financial charges. Investment at EUR 1.767 billion were broadly in line with the same period of the previous year. Net debt stood at EUR 17.4 billion, down 1% versus first half 2025 after the investment activity carried out during the period and the dividend payment. The average cost of debt remained broadly stable at 2.6%. The Board of Directors also approved the distribution of an interim dividend for 2025 of EUR 0.1208 per share, representing a 4% increase compared to the previous year, in line with our dividend policy. As for regulatory updates and as already disclosed, the regulator has changed the RAB indexation for 2025 to the normalized index of consumer price for the European Union countries relating to Italy, IPCA Italy. At the same time, the for 2024 was updated to 7.9% from 5.3% to recover past adjustments. Therefore, 2025 tariff RAB was lifted to EUR 26.2 billion from EUR 25.8 billion. On the 6th of August, ARERA published a resolution for the progressive implementation of the full ROSS by 2028 with a transition period for 2026, 2027. The observation period for the 2026 WACC up date ended in September. The calculation is very close to the figure level, but the final outcome remains uncertain, and it will ultimately depend on the final inflation figure for 2026 and other components of the formula. The Council of Minister approved on June 30, a draft law for the definition of legislative framework for carbon capture and storage, hydrogen and methane emission reduction that needs parliament approval. Last week, on the 27th of October, the technical rules for CCS were issued jointly by the competent ministries. Several progress also on the financing front. We have successfully issued our first U.S. dollar multi-branch sustainability-linked bond totaling $2 billion and EUR 1 billion of EU Green bond. Moreover, in October, we have cash in EUR 121 million of Adriatic line grants. Moving now to our associates portfolio. The stake in ADNOC Gas Pipeline was sold to Lunate for EUR 233 million in March, while our 2% stake in ITM Power was disposed at the end of July. With regards to OGE acquisition in Germany, the foreign direct investment clearance is still ongoing, and this is one condition present for the closing of the deal. The long stop date is now November 17. In addition, we have signed an exclusive agreement for the acquisition of Higas, which has the rights for the conversion of its Oristano LNG coastal storage facility in the Sardinia region into an FSRU terminal. In 9 months, we have accelerated our strategy delivery. I'm now on Page #4. Let me remind the key highlights on gas infrastructure. We have more than 850 construction sites open, which represent a 19% increase versus 9 months 2024. Works on Phase 1 of the red decline are moving forward steadily with an overall completion at 43%. It was 35% at June 30. The BW Singapore regasification unit, moored offshore Ravenna began operations in May and 13 vessels arrived so far. In the 9 months, Italy received 165 LNG tankers, half of which coming from the U.S. for a total volume of about 15 billion cubic meters. At the end of September, storage level was 92%, as mentioned, 10% higher than the European average. At the moment, we have improved at around 95%, well ahead of the rest of Europe to be fully prepared for the winter season. Moving to our energy transition platform on Page #5. The first phase of the CCS project in Ravenna has delivered solid technical results. On the industrial phase, permitting for the pipeline is at an advanced stage and the process for storage has recently begun. We have submitted an application for the Connect European facility grants in excess of EUR 300 million, and we look forward to additional regulatory instruments to move ahead. As mentioned, the Ministry of Environment has just published the Ministerial Decree on CCS technical regulation issued jointly by the competent ministries. On biomethane, we have 72 megawatts already in operation, authorized or under construction, and our mission is to speed the ramp-up and maximize the value of these assets. Renovit backlog is broadly stable at EUR 1.4 billion. With regard to the H2 backbone, we have been awarded EUR 24 million contribution by the Connect European facility to cover approximately half of the feasibility studies, and we are progressing with them. Looking at sustainability and innovation, 35% of CapEx aligns with the EU taxonomy and 57% with SDGs, while sustainable finance is stable at 86% of the total. We expect 2025 Scope 1 and 2 CO2 emission down at least 25% versus 2022, which is our baseline. This is an improvement versus initial expectation of 20% reduction, mainly thanks to the new dispatching optimization tool supported by AI and a better performance on methane in this transition year of application of the new European rules. Furthermore, for the fifth consecutive year, Snam received a gold standard recognition from the United Nations Environment Program, UNEP, for methane emission reduction, confirming the group high standard of transparency and accuracy in methane emission reporting and concrete commitment on emission reduction. Our first employee share ownership plan has had an outstanding participation rate of 55% of the total workforce even more relevant as the first window only allowed for subscription through own capital, tangible signs of employees' alignment with the corporate objectives and their active participation is Snam long-term value creation journey. I would like to take this opportunity to express personally my sincere gratitude to all colleagues who joined and supported this initiative. Moving to Slide #6. Out of the total EUR 1.8 billion of investment broadly in line with the previous year, 35% is EU taxonomy aligned and includes. With regard to gas infrastructure, H2-ready replacements, dual fuel compressor station, biomethane plants connection. As for the energy transition businesses, H2 and CCS, a large part of biomethane CapEx depending on the plant's technical standards and energy efficiency, excluding cogeneration. SDG alignment is at 57%, of which the majority goes towards SDG 7, 9 and 13, respectively, affordable and clean energy, industry innovation and infrastructure and climate action. More than 50% of the CapEx are development investment, reflecting the company industrial growth phase. Let's now move to the 9-month 2025 EBITDA analysis on Slide #7. EBITDA for the period was EUR 2.227 billion, plus 6.6% compared to last year or plus EUR 138 million. Regulatory items were broadly neutral as the recognition of the 2024 deflator update for EUR 52 million and the adoption of Italian IPCA for RAB revaluation starting in 2025 for around EUR 23 million were counterbalanced by the WACC decrease for around EUR 77 million. The growth is mainly attributable to regulatory revenues increased for around EUR 119 million, Stogit Adriatica entered into the perimeter for -- from the 3rd of March 2025 and positively contributed by EUR 30 million. Ravenna FSRU that started operation from May and contributed by EUR 18 million. In details, the regulated revenues growth breaks down as follows: Transport and storage revenue increased by around EUR 122 million linked to the investment plan execution. Fast money effect amount to around EUR 16 million, higher allowed OpEx mainly due to inflation recognition, positive volume effect. These items were partially counterbalanced by the absence of LNG extra revenue recognized in the second quarter of 2024 for around EUR 40 million, lower output-based incentives by EUR 60 million versus last year, mainly attributable to the storage reverse flow service and the expected phaseout of input-based incentives. The increase in gas infrastructure operating costs, about EUR 29 million is mainly attributable to labor cost in large part due to the inflation recognition under the collective labor contract and new hires. With regard to the energy transition business, the plus EUR 5 million EBITDA contribution versus 9 months 2024 is mainly driven by biomethane supported by higher volumes. As for the full year guidance, we update our guidance to EUR 2.950 billion EBITDA, which reflects the positive impact of the 2024 deflator update accounting for around EUR 52 million and the switch to the Italian IPCA index for RAB revaluation starting in 2025, worth approximately EUR 40 million for the full year. I'm now on Page #8 on the associates. Their contribution to group net income was EUR 290 million, a plus EUR 57 million increase compared to the same period of the previous year. Out of the total contribution, EUR 197 million come from our international associates and the remaining EUR 93 million from the Italian associates. Let's now dive into the performance of each one. TAP slightly higher year-on-year contribution is mainly driven by inflation adjusted tariff and lower net financial expenses. With 16% of Italian imports, TAP is the second largest pipeline import route and will be further reinforced by the start of commercial operation of the 1.2 bcm yearly expansion from January 2026. SeaCorridor operating performance is slightly higher, thanks to lower OpEx incurred in the first 9 months, expected to normalize by year-end and lower D&A due to some investment postponement. With approximately 15 bcm imported, it represents the first Italian import route. Terega contribution is substantially in line, thanks to cost savings, we partially offset the higher financial charges due to 2024 refinancing. Moving to Austria. In 2025, TAG benefited from the new regulatory framework, which eliminates volume risk, bringing net income contribution to positive. Also GCA's performance benefited from the new regulatory framework, however, offset by a worsening in the bookings, which will be recovered in T+2 tariff. Worth mentioning the significant increase of exports from Italy to Austria underlying the strategic relevance of this route. Desfa lower contribution was due to extraordinary auction premium on LNG imports and export to Bulgaria in 2024. However, the market outlook remains positive. Greek gas demand rose by nearly 17% year-on-year, driven by higher power generation needs and a colder winter. LNG remains key, covering over 40% of imports and the Alexandroupolis FSRU is now back in operation. Desfa ambitious CapEx plan underpins this strategy. And just yesterday, the Komotini compressor station starts of operations marked the interconnection strengthening with Bulgaria and the wider region. Interconnectors contribution remains in line since we are reaching the yearly regulatory cap, thanks to capacity of almost 50% booked until 2026. EMG contribution is substantially in line compared to the same period of 2024. Regarding ADNOC, as already explained in March, we have completed the stake disposal. On the Italian associates, the growth is mainly driven by Italgas overperformance and by the higher contribution from Adriatic LNG following the increase of Snam participation in the company from last December. For the full year, we expect approximately EUR 365 million contribution from associates, excluding OGE potential contribution. Let's now move to the 9 months 2025 net income analysis on Slide #9. Adjusted net income for the period was EUR 1.096 billion or plus 10% compared to 9 months 2024 due to higher EBITDA by EUR 138 million, as previously commented, partially counterbalanced by higher D&A by EUR 77 million following rising investment and the enter into perimeter of Stogit Adriatica from March and Ravenna FSRU from May, higher net financial expenses by EUR 16 million, mainly driven by a slight increase in financial expenses related to debt, reflecting higher average net debt with an average cost broadly stable at approximately 2.6%. Contribution from associates is positive for EUR 57 million, as already commented as a result of higher international associates for EUR 33 million and higher Italian associates for EUR 24 million. Lower taxes reflect higher contribution from associates to EBT as well as tax credit adjustment related to 2024 income taxes. As for the full year, we update our guidance to EUR 1.420 billion net income adjusted, which reflects the positive impact net of taxes of the 2024 deflator update and the switch to Italian IPCA index for RAB revaluation starting in 2025 with a tax rate for the full year expected to be around 25%. Turning now to the cash flow on Slide #10. Cash flow from operation for the period amount to around EUR 2.063 billion and was the result of EUR 1.717 billion of funds from operation and EUR 346 million of working capital cash generation. The change in working capital was mainly driven by regulatory working capital with around plus EUR 170 million due to tariff-related items, mainly driven by tariff receivable decrease, around minus EUR 110 million absorption due to balancing activities and default service, about plus EUR 130 million of cash generation, mainly driven by the super bonus fiscal credit decrease and around plus EUR 160 million of temporary cash generation due to a reduction in receivable from the compensation energy clearinghouse related to flexibility service to be reserved by year-end. Net investment for the period amount to EUR 2.237 billion, including EUR 564 million of cash out related to Stogit Adriatica and around EUR 23 million of ADNOC disposal cash-in. Other outflows were mainly related to the payment of the dividend for EUR 969 million, resulting in a change in net debt of about EUR 1.188 billion. Moving to Slide #11. Net debt amounted to around EUR 17.4 billion at the end of September 2025. Net cost of debt, which is calculated as financial charges net of liquidity incomes on average net debt for the period was broadly stable at 2.6%, while the fixed/floating mix stood at 89% / 11%. Sustainable finance ratio is at 86%, well on track to reach our long-term target of 90% by 2029. Following the publication of a new sustainable finance framework, we successfully placed in May our first U.S. dollar multi-tranche sustainability-linked bond totaling $2 billion, which was the first sustainability-linked transaction globally with a net zero emission reduction target across Scope 1, 2 and 3. Moreover, in June, we have published a European bond fact sheet and issued our first European green bond of about EUR 1 billion, which so far is the largest senior single tranche by a European corporate. Following this transaction, the funding for the year is completed, leaving remaining part of the year for further opportunistic prefunding activities. Credit ratings were confirmed by Moody's and Fitch following OGE acquisition announcement, while Standard & Poor raised Snam positioning to A- following the upgrade of the sovereign, providing the strength of our credit metrics and business profile. As for the full year guidance, we reduced our net debt guidance to EUR 18 billion, thanks to higher cash conversion, a neutral net working capital effect, greater cash in from associates and an increase in investment-related payables. Net cost of debt is expected to remain stable at 2.6% with net financial expenses at around EUR 340 million. I am now on Slide #12 to wrap up the full year 2025 guidance, where we confirm EUR 2.9 billion of CapEx for the year, of which EUR 2.5 billion on gas infrastructure and EUR 0.4 billion on energy transition. As well as tariff RAB for EUR 26.2 billion, already reflecting the effects of the ARERA Resolution 130 as discussed earlier. We upgrade our full year guidance with respect to an EBITDA of EUR 2.950 billion versus the previous guidance of EUR 2.850 billion, mainly to reflect the effects of the above-mentioned resolution for a total impact of approximately EUR 90 million. Adjusted net income guidance moved to approximately EUR 1.420 billion from EUR 1.350 billion, mainly to reflect the above-mentioned resolution net of taxes. Net debt guidance significantly improves to EUR 18 billion, thanks to higher cash conversion, the neutral net working capital effect, greater cash in from associates and increased investment related payables. This outlook incorporates the expectation that the 24.99% OGE stake acquisition, if completed by 2025 year-end will be financed through either asset rotation or the issuance of a dedicated hybrid instrument. Finally, the Board has approved the distribution of an interim dividend for 2025 amounting to EUR 0.1208 per share with a payment due starting from January 21, 2026. This is up 4% versus the previous year, in line with the guidance and represent a 71.4% payout. To close on Page #13, the current energy scenario continues to highlight the crucial role of gas in ensuring system stability and resilience within an increasingly volatile and interconnected environment. We remain fully committed to support Italy's security of supply as shown by the high storage levels and the significant increase in LNG volumes injected into the network, demonstrating the country's role as a strategic energy gateaway for Europe. We are also accelerating the execution of our strategy with over 850 construction sites currently active across the country, the commission of the Ravenna terminal and the city progress on the Adriatic line. Our strong performance over the first 9 months with all key financial indicators improving reflects the solidity of our business model and operational excellence. This, together with greater financial flexibility, allow us to upgrade our 2025 guidance on EBITDA, net profit and net financial debt, supporting long-term sustainable value creation for all our stakeholders. We are now open to take your questions.
Operator: [Operator Instructions] And the first question comes from the line of Javier Suarez of Mediobanca.
Javier Suarez Hernandez: The first one is on the latest draft law on CCS and hydrogen. If you can elaborate for us your reading of this first draft and the possible implication for Snam and its business model? Then the second question is on the situation -- an update on the situation in Germany with OGE, which is -- the question is which is your best estimate for a decision for the conclusion or not of this deal and which in terms of deadline is the absolute maximum that you have to take a final decision in this operation. And then the third question is on the slide on energy transition. You are mentioning a EUR 1.4 billion backlog. If you can give us some details and granularity on this backlog.
Luca Passa: Thanks, Javier, for the 3 questions. So when it comes to the draft law for CCS H2, this was already widely expected. It was proposed on the June 30, and we are waiting for parliament approval. We give basically the power to the regulator in order to regulate these 2 energy vectors, which currently are not part of the mandate of the regulator. Therefore, is, I think, a very important step when it comes to finalizing our investment decision around these 2 businesses. Now on CCS, on top of the draft law, as I mentioned during the presentation, also a technical specification last week were issued by the ministries and technical specification means security, how to handle, how to transport basically that type of molecule, basically CO2 molecule. So clearly, we are moving in the right direction and will allow us to basically give us, let me say, the way in which we are planning for CCS to take an FID on the industrial phase of the project by the beginning of 2027. When it comes to the German update on the potential acquisition, I can only mention that we currently are on the Phase 2 of the FTI procedures, which has been going since basically the end of April and that we have a long stop date with our counterpart on the contract that ends on the 17th of November. Therefore, our expectation is by then to have an answer one way or the other. And therefore, we will know shortly whether we can finalize and conclude acquisition because this is the only condition precedent for us to basically execute finally the contract. For the energy transition backlog, I can tell you that only 10% is now residential because it has gone down, as you probably remember, a lot of the works were related on the residential part of the Super Ecobonus tax allowances that was [indiscernible] in Italy up until 2023. 45% currently is on public administration, which has been the major focus of the company in the last couple of years and 45% on large industrial customers. So that is the split of the EUR 1.4 billion of backlog, which has a duration over 7 years currently.
Operator: The next question comes from the line of James Brand of Deutsche Bank.
James Brand: Congrats on the results. I just wanted to ask, I know you just kind of answered a little bit on CCS, but I was just kind of keen to understand the kind of time line there for getting more clarity and also what that opportunity could be worth for you if you're willing -- obviously, you haven't set anything out that's too concrete at the moment, but maybe just to delve into that a little bit. So you said you're hoping to start making decisions on projects in early 2027. Could you just tell us kind of what the next steps are on the regulatory side? Are we waiting for the law to pass and then the regulator to come out with some regulatory framework? Or if that's not the case, what else are we waiting for to be coming through, firstly? Secondly, I guess these investments are going to be outside the RAB, but maybe that's not clear yet. And thirdly, is there anything at all you can say about the scope of the investment opportunity here? It seems like it could be a very big one. And obviously, you haven't set anything out, but is there any kind of rough commentary you could give us or help us in kind of understanding how big an opportunity it would be?
Luca Passa: Thanks, James, for your question. On CCS, clearly, the draft law needs to be converted into law by the parliament, and we expect that to happen, I would say, before year-end or just in and around year-end. That will give the powers to ARERA to start formally work on a draft regulation. Now we expect this business to be fully regulated, therefore, contributing to our regulated asset base. I will tell you what we have already included in our business plan presented last January, which is EUR 500 million of CapEx, of which EUR 300 million on transport and EUR 200 million, which is our share in the JV for the storage business together with Eni. The assumption for us is that clearly this EUR 500 million of investment will translate into RAB fully by the end of 2029. And the expected remuneration, at least what we assume so far is to have a remuneration which is similar to the one of gas for both transport and storage, but clearly at a premium. Our assumption is, on average, 100 basis point premium. Clearly, this is a discussion that we will have with the regulator once they are entitled formally to basically start drafting the regulation. But those are basically the expectation. In terms of investment, clearly, if we take an FID decision at the beginning of 2027, the amount of investment for both, I would say, transport is in the region of EUR 800 million more or less, and that will last even beyond clearly the business plan. When it comes to basically the JV, there is another EUR 1 billion, EUR 1.5 billion of investment on our side that will go even beyond those type of dates. But let me say that we will be more specific in terms of the scope of this investment in the business plan update that we will give to the market during the first quarter of next year. But as you pointed out, clearly, this will be a sizable investment. What I can tell you is it will be a fully regulated business and accreting to basically the regulated asset base of the company.
Operator: And the next question comes from the line of Emanuele Oggioni of Kepler Cheuvreux.
Emanuele Oggioni: The first is on the '26 allow WACC based on the official site of ARERA seems that they used the old ECB inflation parameter. So probably the trigger that will not be activated. I don't know if you can comment on this. We'll discover probably in a few hours or tomorrow. The second question is on LNG, the Oristano projects and the possible acquisition. I think probably before you will ask you try to get a higher level of protection for -- within the current regulatory framework for LNG. So basically, volumes warranted similar to the previous 2 vessels in Italy before to go ahead to the investments. And if we can expect investments in line with the previous 2 FSRU, so around EUR 400 million, EUR 450 million per vessel. And finally, when you can expect the update of the business plan will be in January or after along the year?
Luca Passa: Thanks, Emanuele. We are finalizing -- my answer to the last question first. We are finalizing the date is going to be towards the end of February, beginning of March in terms of timing, but we have not finalized yet. When it comes to the first question, what I can comment is you all analysts have models in order to model whether the trigger gets triggered or not and what is the inflation assumption that you need to set into the model for it to trigger or not to trigger. So clearly, this is a decision that ARERA will take. And as you said, probably they already taken, but it will be public in the next few hours. So I cannot comment on that. I can only add that ARERA has always been a very reasonable regulator. Therefore, I expect them to take a reasonable decision also on this topic. When it comes to the Sardinia or Oristano project, first of all, this is going to be a virtual pipeline to the mainland. Therefore, also the LNG facility will be accounted into the transport regulation and nor the LNG regulation. So we will enjoy the same type of remuneration of a transport facility. The amount of investment that we are expecting to basically devote to both the LNG ship as well as the works that we need to do on site in terms of pipes is in the region of EUR 700 million will be fully detailed in the new business plan again that we presented between the end of February and the beginning of March of next year. Then on the broader question, whether we feel that LNG terminals need to be fully guaranteed in terms of volumes. Clearly, this is very important for us. You have seen from the numbers that LNG is becoming a key source of imports when it comes to gas. Therefore, we feel that this investment need to be fully regulated, and we should have guarantee on volume at 100% rather than the current 64%.
Operator: The next question comes from the line of Sarah Lester of MS.
Sarah Lester: Just a really quick one, please, on your latest disposals preference ranking. So I saw that you mentioned the possible asset rotation to fund the Open Grid Europe acquisition. So just wondering if you're able to please provide a bit more color around how you currently consider the pecking order for the potential candidates for disposal post ADNOC. And I suppose this is actually a broader question, too. It's not just within the Open Grid Europe context.
Luca Passa: No. The asset rotation is not just in the context of the potential of the acquisition. It's part of the review of the portfolio that we are doing following clearly the strategic positioning of the company going forward across certain regions. Now what I can comment today is only on the public process that we currently have ongoing, which is the disposal of our biomethane platform. We have hired publicly all advisers, including financial advisers, and we will be in the market with that portfolio probably closely after year-end. The book value of that portfolio, just for you to remember, is in the region of EUR 560 million as of today.
Operator: Okay. Next question is from the line of Marcin Wojtal of Bank of America.
Marcin Wojtal: Just a couple of questions on the numbers, if you allow me. So firstly, you increased your guidance for EBITDA by about EUR 100 million. Can you just remind us what amount of that EUR 100 million actually flows mechanically into 2026? And my second question, could you just repeat the indication that you gave for associates for 2025? I didn't quite catch that decision, but if you could just clarify that guidance.
Luca Passa: Yes. Marcin, the guidance for contribution of the associate portfolio for the full year expected today is EUR 365 million, which is slightly higher than what I said in the first half results call. And this EUR 365 million exclude any contribution from OGE because even if you go to closing, it will not be part of the contribution for this year. When it comes to what of the current guidance upgrade will translate into 2026, I can tell you that the same contribution on the [indiscernible] that we had in 2025, which is about EUR 40 million, we will also driven into 2026. So EUR 40 million is what we expect to have higher contribution from the new indexation in 2026.
Operator: The next question comes from Davide Candela of Intesa Sanpaolo.
Davide Candela: I have 2. First one is a clarification on net debt. You improved the guidance by EUR 400 million. I was wondering if that neutral working capital you're seeing is just temporary and as an effect for this year and will be reverted in the next year or it is actually a structural recovery you are seeing? Second question, in the Slide 5, you mentioned a contribution with regards to the reduction of methane emission from AI. I was wondering if with regards to this topic, you are also seeing some benefits on the cost side and your general operation in your company.
Luca Passa: Thanks, David. When it comes to the working capital neutral expectation towards year-end, I mean, this is our job. I mean we need to plan on a working capital basis being neutral every year. Clearly, we had swings in the past 2 to 3 years, given that the market was either long or short with the relevant prices impact that affect clearly our working capital, especially towards year-end. But the expectation, if prices, let me say, stabilize across the numbers that we are seeing in the last -- in the recent months, we should have neutral working capital every year. And that's on this point. When it comes to the reduction of emissions, which is expected to be 25% vis-a-vis 2022, that is part of the work that we're doing on the way in which we dispatch basically our gas in the network. We fully digitalize our assets now is almost 18 months. And after clearly digitalizing our asset, we are using different type of algorithms also supported by AI intelligence in order to see what is the best dispatching method that allow us to consume less in terms of burning gas in order to pressure the gas into the pipes. Clearly, there are also some cost benefit, but those are part of the remuneration and in the numbers that already we are seeing when it comes to what is the cost of dispatching our gas transport. I can tell you that we are just seeing the first signs of a full digitalized network system that might even improve going forward, not only on emission reduction, but on general efficiency going forward.
Operator: The next question comes from the line of Bartek Kubicki of Bernstein.
Bartlomiej Kubicki: I would like to ask 3 questions. First of all, with regards to the slide on gas demand, you are pointing to higher gas demand from households. And my question is whether you see any reason to believe that the gas demand from households will structurally increase in the future? Or do you think it's rather going to be down trending and only impacted by weather? Second of all, on the energy efficiency order book you discussed before, I would like to ask you what do you see in terms of margins? Meaning do you see margins improving over time? Or do you think there's an increasing competition and consequently, margins are being squeezed? And the third question will be on your convertible bond on Italgas and the latest share price performance. If you can maybe explain a little bit how does it impact your financial costs and what it could do to your future cash outflows once the bond is redeemed?
Luca Passa: Thanks, Bartek, for your 3 questions. So when it comes to gas demand, besides also the weather adjustment that you discussed, the expectation, and I don't think it's going to be driven mainly by residential, but both by industrial as well as thermoelectric production is for a stabilization of desire level of volumes. We expect this year to close basically with a full demand in the region of 64 basically bcm, which confirms the growth that we've seen in the first 9 months of the year. But let me also add that the expectation is to stay at this level up until 2030. Therefore, I think there is a structural shift when it comes to usage of gas and in particular, for thermoelectric production, which only started this year, but will be structural, and we will see it going forward also for the announcement of other countries to increase combined cycle generation when it comes to electricity. When it comes to the energy efficiency marginality, what I can tell you is that clearly, we have moved from a pure or, let me say, larger residential business to public administration and industrials. This business has always run in the region of 16% to 19% in terms of marginality. Currently, we are not seeing margin pressures, but the more the contracts are larger, the more sophisticated customers and all these customers, especially when it comes to public authority are public tenders, clearly, there is some kind of pressure on marginality, but it's not something that we are seeing because the book has been built over the last 24 months. When it comes to the Italgas exchangeable, what I can comment is it is an exchangeable currently is in the money in terms of where the share price is vis-a-vis the conversion premium. Therefore, we have optionality to convert if you want, starting from, I think, is September, October next year or wait for maturity. And in that case, we will decide whether to deliver share, cash or a mix of those. There is no impact in terms of cash flows in the sense that we have an underlying and we have set the terms to which the instruments will be reimbursed.
Operator: The next question comes from the line of Charles Swabey of HSBC.
Charles Swabey: I just have one on U.K. gas storage and your ambitions there through dCarbonX. Just I was wondering if you could provide any update on sort of the timing or size of the investment there? And if you're in conversation with government about any sort of potential regulatory framework that might underpin that investment.
Luca Passa: What I can comment, Charles, on that is that current consultation, DCX is clearly working -- developing, let me say, a project in that respect. But as of now, in terms of where we stand and what could be, let me say, a pre-FID type of schedule, it's very difficult to say. Again, for us, our participation in DCX as a developer of these projects, then we will consider whether we want to invest in the project or not. So we have no commitment in that sense going forward.
Operator: Thank you. As of now, there are no further questions. I will give it a moment in case there is any follow-up questions from the participants. There are no further questions. I will now hand you over back to your host, Francesca, for any closing remarks.
Francesca Pezzoli: So thank you very much for listening. As usual, the Investor Relations team is available for any follow-up. Thank you. Bye-bye.
Luca Passa: Thank you.