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Edited Transcript of IRE.MI earnings conference call or presentation 2-Aug-18 8:00am GMT

Half Year 2018 Iren SpA Earnings Call

Torino Aug 13, 2018 (Thomson StreetEvents) -- Edited Transcript of Iren SpA earnings conference call or presentation Thursday, August 2, 2018 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Massimo Levrino

Iren SpA - Financial Reporting Manager and Manager of the Administration, Finance & Control

* Vito Massimiliano Bianco

Iren SpA - CEO & Director

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Conference Call Participants

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* Enrico Bartoli

MainFirst Bank AG, Research Division - MD

* Javier Suarez Hernandez

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

* Roberto Letizia

Equita SIM S.p.A., Research Division - Analyst

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Presentation

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Operator [1]

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Good morning. This is the Chorus Call conference operator. Welcome, and thank you, for joining the IREN Group First Half 2018 Results Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Massimiliano Bianco, CEO of IREN Group. Please go ahead, sir.

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [2]

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Thank you. Good morning, everybody, and thank you for attending the presentation of IREN's '18 first half results.

Starting from Page 2, you can find that the usual summary of the performance of the group in the period. As you can see, all the operating KPIs reported double-digit percentage growth, which is a very significant result of sales but I think it's even more important to comment on the quality of this performance. That is why I would like to draw your attention on -- to the EBITDA bridge.

As you can see, the total contribution coming from organic growth, synergies and consolidation, the pillars of our business plan, amount to EUR 32 million, easily covering the negative scenario effect impacting on the EBITDA for EUR 22 million.

This shows once again the ability of the group in coping with unfavorable conditions, leveraging different elements to which the targets set, paving the way for further development.

To give you some more color on minus EUR 22 million scenario, half of it, approximately EUR 11 million, is linked to the absence of the positive elements reported in the first half '17 related to the utilization of the gas storage bought at a very favorable price in '16. The receivable EUR 11 million is due to -- instead to a combination of different elements; that is positive contribution from hydroelectric production and from ancillary services, counterbalanced by a drop in thermoelectric margins and volumes caused mainly by a sharp increase in gas prices and ETS certificate price.

As far as the consolidation is concerned, approximately 50% of the contribution is attributable to the energy value chain, thanks mainly to the inclusion of our photovoltaic assets in year-end consolidation parameter and the rest to networks and waste business unit, thanks to ACAM.

On top of this, we reported a positive nonrecurring effect for approximately EUR 54 million. This made of EUR 60 million mainly related to the recognition of white certificates for previous years, EUR 20 million of which already reported in the first Q '18, linked to the district heating, slightly offset by some minor negative elements. I would like to underline the fact that this, the recognition, is based on the significant investment that the company made in the district heating sector during the previous year, which allowed us to keep the national leadership with more than 87 million cubic meters of district heating agent (inaudible).

All these elements are reflected and hence, the net profit that grew by more than 29%, thanks also to lower financial charges and taxes.

Finally, it's worth noting the robust growth in Tech. CapEx, plus 59%, following the [32.3%] already reported at the end of '17. This positive trend take advantage of the financial flexibility achieved in the last few years and signaled the deep commitment of the company pursuing the development guidelines defined in business plan.

Let's start with the business unit section with generation and district heating on Page 3, which during the first half of the year reported a remarkable plus 40% EBITDA growth. As already mentioned, these very positive results was affected by a nonrecurring element for approximately EUR 60 million, the majority of which related to the recognition of white certificates for previous years, linked to the district heating.

It is worth noting that this is a further acknowledgment of district heating as a tool to improve energy efficiency, reducing, therefore, pollution in territories in which it is implemented. This acknowledgment is very important for IREN because the expansion of district heating networks is one of our major strategic targets.

Furthermore, the company took advantage of the supportive white certificates scenario, by choosing the right time to sell them. Net of this effect, the EBITDA would have been substantially in line with last year in spite of the absence of the contingent very positive scenario reported in the first months of '17.

This result is related mainly to the positive trend in hydroelectric sector, both in terms of volumes and prices and to higher contribution from ancillary services, which partially offset negative spark-spreads in the second quarter in thermoelectric sector.

It is worth highlighting the fact that the company managed to limit the negative impact of the scenario thanks also to additional flexibility to their thermoelectric and cogeneration plant due to investments made over the last 3 years, which allowed it have -- to maximize the contribution for MSD and not producing when the price -- electricity prices were experienced.

The balance of all these elements led to a minus EUR 10 million of EBITDA for the period, which was offset by the achievement of synergies and inclusion in scope of consolidation of our photovoltaic mini hydro plant for approximately EUR 4 million.

As far as the outlook is concerned, the forward prices curve suggests a further significant increase in prices, which should lead to a widening for thermoelectric spark-spread in the second part of year, assuming stable gas prices.

Moving to the market sector, Page 4. The EUR 7 million decrease in EBITDA derives from the gas sector because of the absence of the positive elements reported in the first half '17 and linked to the utilization of the gas storage and (inaudible) in '16 at a very low price.

In the energy sector instead, we reported a stable EBITDA, stemming from the combined effect of reduction in sales margins due to higher oil prices, which represents a proxy of electricity procurement price, which was offset by the nonrecurring contribution for previous years' balances related to commodity transport charges already reported in the first Q this year.

In operating terms, it is important to underline the growth in client base for approximate 20,000 clients, which maintained as on-track on the business plan target. In fact, we are aiming to reach 1.9 million clients by end of 2022, which means approximately 30,000 to 40,000 clients per year. In terms of volume, the electricity sold to end client increased by 8%, thanks mainly to the awarding of Consip tender last year.

As far as the gas volumes are concerned, the reduction is mainly linked instead to lower internal usage due to lower thermoelectric production, already mentioned in the previous slide.

Before commenting the outlook, I would like to say some words about IREN's energy value chain in order to give you a broader picture of what the overall trend was in the last 6 months and how we expect to develop in the next -- in the near future.

In spite of the absence of the very positive scenario reported in the first Q '17 and in spite of the unfavorable electricity and gas prices trend reported in this year, the group managed to keep the EBITDA of the whole energy value chain substantially stable compared to the first half of '17, net of EUR 60 million white certificates now recorded here. This kind of resilience was possible thanks to the specific characteristics and range of our generation plants portfolio, hydroelectric, thermoelectric and cogeneration, and to the integration between market and generation strategic business units.

Having saying that, the outlook is that the PUN growth forecast will benefit the generation business unit and further negatively affect the market business unit. But net of the nonrecurring effect, the overall EBITDA contribution from the energy value chain should be positive by the end of this year.

Moving on the networks sector, Page 5. The 5% growth reported in EBITDA in the sum -- is the sum of several effects. Firstly, the water sector has benefited from significant synergies achieved, thanks to a continuing implementation of the performance improvement initiatives.

On top of this, the increasing RABs, thanks to higher investment, plus 39% in '17, plus 55% in the first half '18, allowed for higher regulator revenues, the positive effect of which are directly reflected in margins. It's also worth noting that the growing RAB will ensure that both a structure growth and stability in margin as a network-based business are regular (inaudible). Finally, the contribution from consolidation of ACAM, water distribution sector starting from April '18, plus EUR 5 million.

As far as the outlook is concerned, the same positive trends experienced in the first half of this year, including ACAM consolidation, is recorded also in the second, partially offsetting the absence of a number of positive nonrecurring elements reported in the second half '17.

The last business unit to IREN is waste sector, Page 6, where we find a slight growth, plus 3%, a turnaround compared to the first Q '18. This trend reversal was possible thanks to a particular positive performance of our disposal plant portfolio due firstly to a better situation of the Turin waste-to-energy plant and a landfill and second, linked to higher electricity price. On top of these, the contribution coming from ACAM consolidation for approximately EUR 1 million.

Particularly important is also to the increase in special waste volumes, plus 40%, in light of the expected development of the treatment plant portfolio for the next few years.

As far as the outlook is concerned, we expect the trend experienced in the first half of the year to continue also in the second half, offsetting a number of already scheduled maintenance initiatives on our plans.

Now, I hand over to Massimo Levrino, the CFO of the group, to comment on financial performance of the company.

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Massimo Levrino, Iren SpA - Financial Reporting Manager and Manager of the Administration, Finance & Control [3]

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Thank you, Massimiliano. Good morning, everybody. Now we are going to Page 7, which I'll show the first half '18 results from EBITDA to net profit.

Starting from the EBITDA. EBIT stands at EUR 315 million, and you can see an increase of EUR 58 million, a bit lower than the growth of EBITDA, but this is due to the growth of depreciation and amortization that is partially offset by the reduction in provision.

Depreciation rose by EUR 13 million, mainly related to the increase of fixed assets and due also to the extension with the scope of consolidation of the company, [we know] ACAM and RAB. Provision stands at EUR 21 million and showed a decrease of EUR 8 million. The decrease is related to longer provision for bad debt, due to the impact of new accounting standard, the IFRS 9. We already had in the first quarter the adjustment of the provisions for EUR 5 million, that is stable for the full year.

EBT stands at EUR 287 million. It's a strong growth of 58 -- EUR 57 million compared with 2017. The reasons are for, first of all, the financial charges for loans and bonds that stands at EUR 34 million, decreased at -- by EUR 8 million, this is due to -- mainly to the lower cost of the financial debt from 3.3% in 2017 to 2.9% in 2018, a reduction of 12%, roughly.

Other financial income are positive and stands at EUR 3.4 million and shows a better result of EUR 1 million due to the positive contribution of the fair value on derivatives.

The net profit of the company is consolidated using the equity method stands at EUR 0.10 million, the decrease of [EUR 37 million] as compared with '17, is due to higher nonrecurring results of the company [as payout] and to higher net profit of the company as in 2017.

Fourth, the participation adjustment stands at EUR 2 million, a decrease of 7 point -- EUR 6.6 million and due in particular to the adjustment of the equity measurement in Salerno Energia accounted in the first half '17.

Going to the net profit. The group net profit shows a growth of EUR 42 million, an increase of 29.2%, due mainly to the increase of EBITDA, EBT and slightly to the reduction of the tax rate from 31.5% to 30.7% in 2018.

We confirm so far the tax rate for the full year in the range of 31%, 32%. Minorities were EUR 12 million, substantially stable compared with the previous year.

Now, we are going to Page 8. You can see the cash flow and the net financial position. The net financial position on 30 June 2018, shows an improvement of EUR 107 million without considering the effect of the financial (inaudible) to consolidation activities and referred to the position and control of the company (inaudible) and records from April 1, 2018. So we can confirm the positive trend already shown in 2018 and previous years and we consider the cash out for consolidation, the net financial position rose from EUR 2,372 million to EUR 2,428 million, an increase of EUR 56 million.

The positive result is due, of course, to the positive cash flow. If we consider the sum of net profit and depreciation provision, the increase of cash flow in the first half was 20% compared with this previous first half 2017.

The net working capital showed a decrease of EUR 16 million and the total investment was EUR 164 million, a strong increase that we already mentioned of EUR 60 million.

The disposals were EUR 20 million and are due to the sale of stake is more subsidiaries and the dividend pays are at EUR 113 million, with an increase of EUR 24 million. EUR 11 million of these are repayable of IREN shareholders.

Going to Page 9, you see the interest rate and debt structure. There are no significant changes compared with the first quarter. The first pie chart on the right represents the breakdown of the gross debt and you can see only 9% of the gross debt is at the variable rate; the remaining 91% is at fixed rate or hedged with the swap.

The average duration for long-term debt is 5.5 years, higher than the first half 2017, when mainly it was 4.9 years, thanks to the EUR 500 million in bond issued in October last year. The cost of debt, I have already mentioned that it is lower, 2.9%. That is actually due to the liability management we did last year and was -- cost was accounted in the profit and loss of 2017.

The second pie chart on the right represents a breakdown of the debt structure. The pie chart shows that IREN's total gross debt is formed with bonds for 56%, the other financials, so they are 44% and with 31% derived from EIB funds.

And lastly, I want to point out that we have the availability from the EIB of further EUR 235 million loans.

Now, I hand it over to Mr. Bianco.

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [4]

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Thank you. As far as the closing remarks are concerned, moving to Slide 10, I would like to point out once again, the ability of the group in overcoming difficult scenario, leveraging firstly the organic growth, thanks to the continuous development of efficiency gaining processes and on a steady increase in investment, making it possible to turn these advantages into structural benefits.

Secondly, achievement of synergies, thanks to the full implementation of the performance improvement plan, inspired by more with less philosophy.

Thirdly M&A, with the completion of the ACAM aggregation in April, [signaling] the multiregional approach of IREN.

Having said that, in line with the -- of the positive result achieved in the first half of the year, we confirm our expectation to report improved full year '18 results compared to the business plan target. In particular, the new full year '18 EBITDA guidance confirms the higher level of the range we gave in the first Q '18, which was EUR 870 million, EUR 880 million, including ACAM. On top of this, with approximately EUR 40 million of white certificates reported in this quarter, second quarter '18, guidance for the full year EBITDA '18 is in the region of EUR 920 million. It means that we expect to recover in the second half of this year to higher thermoelectric margins and volumes, the negative energy scenario we experienced in the second Q '18.

In terms of the net financial position, we expect to have a net financial position to EBITDA ratio in the region of 2.7%, 2.8%.

Finally, we expect a net profit higher than EUR 250 million.

Now we can start the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Javier Suarez of Mediobanca.

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Javier Suarez Hernandez, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [2]

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Three of them. The first one is on the generation on district heating division. If you can give us the number of contribution at the EBITDA level from the MSD market. I think that during the first quarter of the year, you gave an expectation for the full year of [EUR 15 million]. If you can give us the number reached during the second half of 2018 and how these compared with first half 2017. Then on the white certificates. You have been mentioning a total accumulated account -- amount during the first half 2018 of EUR 60 million, EBITDA contribution extraordinary. I think that this is for the all remaining extraordinary things, so you can confirm that there is nothing left for the second half 2018. And also, if you can clarify the contribution from ordinary white certificates. So I think that apart from this amount corresponding from -- to previous year, there is an ongoing generation of ordinary white certificates. If you can clarify the contribution in the first half of 2018 and how that compared with last year, first half 2017? And then the -- I have seen -- or we have seen an increase and turnaround in the waste business during the second quarter of the year. If you can help us to understand the dynamics for this improving during the second quarter of the year. And the final question is on the supply activity. I was interested to see the ongoing dynamics coming from market liberalizations and the implication that in your business plan may have the possible delay in market liberalization beyond 1 July 2019.

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [3]

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Thank you, Javier. So starting from last question about the liberalization. Right now, it's difficult to understand what is now a low that set from the 1 July, '19, the start of -- the end of protected market will be maintained by this parliament. Assuming that the law with the same as we are right now, we can expect a positive impact from the end of the protected margin for the same region -- same reasons we discussed in the past about these. So because right now, we have 300,000 roughly of clients in the protected market and the profitability of these clients is very, very poor and because of the full utilization of the market, we expect that even if we lose a lot of them, we can keep the margin or as we can expect as an upside on our business plan that we can improve the profitability of the supply because of this. Going to your question about waste. The main driver of the better performance compared to the first Q is related to a disposal phase of the cycle we manage. So it is not related to the recovery costs that we had in the first half related to the increase of the door-to-door collection activity. We expect to recover kind of a startup cost in the next months, hopefully, during this year, but was related to a better performance in the disposal phases for higher performance on waste-to-energy and landfill we have been doing for special waste. About your question on MSD. You said we had an expectation for a lower contribution on year base from MSD. What happened in the last month is that in the first half of this year, we experienced roughly EUR 40 million of MSD. And so because of these, our expectation by the end of this year is to increase the MSD level on a full year basis. How much, it will be difficult to say because the market it's not, let's say, exactly the sum between -- of spark-spread and because we'd consider volumes and MSD, but to consider that if we will see as we expected to see higher spark-spread in the second half of the year, we will experience a lower contribution of MSD. So what we expect for the full year is to recover as of some of the MSD and, let's say, profitability on the spark-spread side of the generation to recover the poor second Q [or year-end] and because of this, we confirmed our guidance on the full year and, of course, on top of this, the white certificates. About white certificates, yes, all the 60 -- the EUR 60 million we had in the first half, we don't have any more nonrecurring impact. We don't expect any more nonrecurring impact on '18. So on the ordinary basis, the contribution of white certificate is in a range of EUR 22 million, EUR 24 million, assuming that the prices for white certificates will be at the same level that we expect that will be right now. So in either EUR 220 million, EUR 230 million positive because on the production of white certificates on ordinary basis related to the -- to (inaudible) plant is about EUR 100,000 per year.

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Javier Suarez Hernandez, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [4]

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And can you remember the level of ancillary services during the first half of 2017?

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [5]

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Just a moment, please. We can say that we did roughly EUR 15 million more this year in the first half, so last year was EUR 26 million.

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Operator [6]

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The next question is from Enrico Bartoli of MainFirst.

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Enrico Bartoli, MainFirst Bank AG, Research Division - MD [7]

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First of all, back on the power generation business, can you provide some outlook for the hydro production that you expect in the second half? If I'm right, your increase in production in the second quarter was lower than the average of the systems. So if you have additional potential to ramp up the hydro production in the second part of the year. And I was wondering, which is the portion of your hydro production that has been hedged in terms of pricing? And second was regarding the power generation business. You mentioned expected improvement from spreads in the second half of the year. If you can give us the level that you experienced in the first half, possibly compared to the first half of last year? And if you can be a bit more specific on what your expectation underlying the guidance in terms of spark-spreads? Then the contribution, please, on ACAM to the networks business? And the last one is on the cost of debt. On -- there was a significant reduction of interest charges compared to last year. My calculated cost of debt for the first half is lower than the 2.9% that you indicate in the presentation. If you had any one-offs in the first half? And if, let's say, more or less the amount that we saw in terms of interest charges in the first half can be repeated in the second part of the year?

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Massimo Levrino, Iren SpA - Financial Reporting Manager and Manager of the Administration, Finance & Control [8]

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In terms of cost of debt, there are no one-offs in the first half. Probably, you -- the slight difference between our calculation and your calculation, but 2.9% is around the percentage of the period. We have already announced that in the year that the forecast is to reduce further because of debt until 2.8%, but we are talking about only a little difference between our valuation.

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [9]

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Okay. So moving to the other question. So about ACAM and -- on yearly basis, the contribution of water is -- I'm sorry, will be for the -- this year will be EUR 20 million, the contribution of ACAM, the largest part of this is related to the water business. So you can assume on yearly basis, as we said before, the work we start -- we already started to do on synergies, EUR 25 million, EUR 26 million on yearly basis. About the -- your first question on hydro or generation. First, we have to consider that last year, we had production volumes that were higher than the average of the system. So the increase is -- in the first Q -- in the first half of this year of roughly 150 gigawatt hours versus last year. So you can assume more than EUR 10 million increase as a combination of volume and prices. About spark-spread level, we expect in the second half a level of EUR 4, EUR 5 for megawatt hour compared to what we experienced in the first half of this year, which was close to 0 on average for the first half of this year.

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Enrico Bartoli, MainFirst Bank AG, Research Division - MD [10]

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So in terms of outlook for the hydro volumes and the level of hedging?

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [11]

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Just a moment, please. It will be -- we expect roughly 150, 200 gigawatt hour compared to last year, the outlook for the second half of the year. And we don't have any hedge on this.

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Operator [12]

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The next question is from Roberto Letizia of Equita.

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Roberto Letizia, Equita SIM S.p.A., Research Division - Analyst [13]

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A clarification on the guidance provided, just to be clear I got all the moving parts. But the contribution of the white certificates, you mentioned is EUR 60 million in the first half. I understand that all this EUR 60 million, but you can correct me if I got it wrongly, all this EUR 60 million contribution is nonrecurring, meaning that the EUR 60 million refers to the recovery of the past years. And on top of that, you should have the normal contribution of the white certificates. So if I got it correctly, roughly the contribution in the first half is EUR 80 million, out of which EUR 60 million is nonrecurring. Then if I take the EUR 60 million on your guidance of EUR 920 million and I deduct them, I arrive to an underlying excluding the white certificates of EUR 860 million, which would be cutting the guidance you provided in the past month. Am I got it correctly? Or did I get any wrong interpretation? Because you mentioned again that the old guidance, EUR 870 million, EUR 880 million. But then you mentioned, I mean, white certificates for EUR 40 million but I actually understood they are EUR 60 million. So can you correct or clarify better the guidance, please?

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [14]

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Okay, I will try. So first, going back to the first quarter guidance, we said EUR 870 million and EUR 880 million. That included already EUR 20 million of nonrecurring white certificate that we already had in the first Q. In the second Q, we added EUR 40 million; that was again a nonrecurring element. So the sum of EUR 20 million in the first Q and EUR 40 million in second Q '18 is EUR 60 million of white certificate, nonrecurring, that are the whole amount of white certificates nonrecurring that we will have in '18. So the guidance we gave in the first Q is consistent with the guidance we are giving today, assuming that the second Q, we add the EUR 40 million of white certificates more. On a year base, we have another roughly 100,000 white certificates that's worth EUR 22 million, EUR 24 million. So in the first half of the year, we are roughly half of these amounts. So EUR 11 million, EUR 12 million are ordinary white certificates linked to the cogeneration plant of Turin. So that in the first half of this year, we have EUR 60 million plus EUR 11 million, EUR 12 million ordinary white certificate contribution.

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Roberto Letizia, Equita SIM S.p.A., Research Division - Analyst [15]

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Okay. So are these all taxed imports, right? So on the net income it is going to be EUR 60 million minus the 30% tax rate. Is it correct? To meet also your guidance on the net income, because you mentioned the EUR 250 million net income but that should include, again, around EUR 40 million minus tax rate?

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [16]

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Yes. Yes.

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Operator [17]

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(Operator Instructions) The next question is a follow-up from Javier Suarez of Mediobanca.

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Javier Suarez Hernandez, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [18]

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I just wanted to have a clarification on your expectations about the year-end in the line provisions. I think that on the presentation in the Slide #7, you are mentioning that there is lower provisions during first half. But these are finance nonrecurring. So I'm just wondering if you can give us a guidance for where that level of provisions during the first half of 2018 are at EUR 20 million, EUR 22 million should be landing in the full year 2018. And also interested on your guidance for the line equity consolidation by the year-end. I think that there is this first half, EUR 0.8 million. And I was wondering if you can give us a guidance for the full year in that number? And then participation adjustment, you can clarify, again, toward EUR 2 million to what this corresponding to and if this number should be staying there by the year-end?

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Massimo Levrino, Iren SpA - Financial Reporting Manager and Manager of the Administration, Finance & Control [19]

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Okay. Turning to the provision. Yes, they are going well, the provision in the first half. But in the -- for the full year, we confirm EUR 60 million for this total provision, that is more or less the same guidance we gave in the previous quarter. Referring to the equity -- company consolidated with the equity method, we think that the contribution on the full year will be in the region of EUR 4.5 million.

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Operator [20]

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The next question is from Enrico Bartoli of MainFirst.

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Enrico Bartoli, MainFirst Bank AG, Research Division - MD [21]

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A couple of follow-ups. First of all, on possible M&A in the second half of the year. Can you update on this matter? On the press, there was anticipation that you are discussing for the San Gimignano plants. Can you give us some details on this possible acquisition, possibly the EBITDA that this asset produced at full year level? And the second is regarding the CapEx, what you expect at full year level?

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [22]

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Okay. About M&A, as we always say, we are very committed in continuing the consolidation process that we are doing in our historical area. So we expect to continue and we expect to finalize some small transaction by the end of this year. So we expect, because of the [de-floor] are higher in terms of number or target and the probability to finalize them is in the waste sector. So we expect to finalize at least one transaction by the end of this year. The meaning of this transaction is, of course, the -- to strengthen the opportunity not only to increase the EBITDA, but also the probability to increase the, let's say, the role that we already have in Italy as a leading player in the waste sector. So we will continue in the -- right now, we have a very significant number of deals we are looking at, and we are very confident to finalize, but we have also to consider that all of them are small. So as a single deal, it is not so relevant in terms of contribution on the EBITDA level but to see that the sum of them in the medium term and the strategic contribution that each of them can give to our strategy to strengthen our position here not only in the hydro area but as a leading player in Italy. About the CapEx, I'm sorry, we expect to reach EUR 450 million by the end of this year.

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Operator [23]

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(Operator Instructions) Gentlemen, there are no more questions. Sorry, there is a follow-up from Javier Suarez.

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Javier Suarez Hernandez, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [24]

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Sorry again for coming back. It's just a clarification on dividend policy. Maybe you can clarify that. Obviously, there is a significant one-off that has been included in the first half of 2018. The question could be if that extraordinary one-off that has been accounted for during first half is eligible within -- for your dividend policy?

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [25]

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Thank you. As you know, the dividend policy is -- in our business plan is our commitment to increase on year basis at least 10% year-on-year. Right now, as you know, we are working on an update on our business plan, so by that time, we will consider if the positive '18 year will allow us to a higher starting point for the next dividend policy.

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Operator [26]

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Gentlemen, there are no more questions registered at this time.

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Vito Massimiliano Bianco, Iren SpA - CEO & Director [27]

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Okay. Thank you to everybody and (foreign language).

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Operator [28]

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Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.