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[Interpreted] Good afternoon. This is the Chorus Call operator. Welcome to the Q1 2023 results of ACEA Group conference call. [Operator Instructions] And now I would like to hand you over to Mrs. Ira Angrisani, Head of Investor Relations. Ira, please go ahead.
[Interpreted] Good afternoon, and thank you very much for attending the -- at Group results presentation of Q1 '23. The call will be held by Mr. Palermo, the CEO of the company; and then a Q&A session will follow. Please, Dr. Palermo, floor to you.
[Interpreted] Good afternoon, everyone, and thank you very much for attending this conference call. We are going to report on the results at the 1st of March 23. Q1 '23 confirms the positive trend that was reported already in the last month of 2022. -- in a market environment that remains challenging. The group has increased its EBITDA by 6% and net profit that is in line and net debt-to-EBITDA ratio at 3.3%, so 3.3x -- as for the EBITDA -- we can see the results of the first results of the actuality place at the end of 2022 to optimize cost and boost operational efficiency, which has led to an improvement in margins despite the difficult market conditions.
Net profit compared with the previous year has been affected by the increase in financial charges driven by progressive rise in interest rates starting in the second half of 2022 already. And comparing net profit with 2022 net profit considered last year, we had a positive impact, one-off positive impact that was accounted for by the capital gain on the sale of majority stake in [indiscernible]. So, without this, our net profit is in line with last year despite the rising interest rates. As I said, the net debt-to-EBITDA ratio at 3.3x confirms the sound capital structure. We have put in place a number of actions for -- to achieve a greater and more rigorous financial management in terms of investments and procurement procedures that are now generating the first results.
The main highlights on the following slide show once again that the Acer Group is a major industrial player. Please consider that the regulated business is substantial compared with our peers -- as a consequence, we feel confident to confirm our growing trends. Revenues reached EUR 1.2 billion, up 4%. EBITDA is up 6% to EUR 366 million. Net profit is EUR 73 million, in line with expectations. Talking about CapEx. CapEx has increased, but this is well under control. Net debt dropped to EUR 4.339 billion, which is mirrored in the leverage, namely net debt and EBITDA ratio. In the first month of '23 the group has witnessed a number of extremely relevant events especially as far as the number of deals are concerned like the Deco stake acquisition or the business combination with ACM that was closed earlier this year. As for Deco, the acquisition was completed in January 23 with as far as -- at and [indiscernible] that these 2 transactions were completed in 3 -- April 23. Then we have bidded for the new waste-to-energy plant in room. Currently, we are the only EBITDA, and we'll be updating you going forward. A set of events have also materialized that are particularly relevant to the company's sustainability that are summarized on the right of this slide. For instance, Asia obtained top employees Italy 23 certification -- then we were confirmed being included in the gender equity index with a very high score. And we have started a number of activities with the labor unions. We have introduced this called the charter of the personal participation, which in our book is a first step towards improving the relations with the trade unions. And now I would like to hand you over to our CFO, who will be commenting on the other highlights.
[Interpreted] Thank you very much. So, we can move on to the economic and financial highlights, part of which have already been mentioned by our CEO, and I'm going to dwell on some of them. As we said, EBITDA is up 6%. -- the regulated businesses, particularly Water and Energy Flash contributed substantially to our EBITDA growth. As for Ambiente and generation businesses that we report a negative figure. This is mainly due to the reduction of energy generation, which, in turn, has led to a recovery and therefore, a positive impact of the commercial and trading business. As we said, EBITDA reached EUR 336 million in Q1 '23, up EUR 20 million.
Regulated business accounts for 86% -- and here, you see the breakdown of the EBITDA by businesses. since the end of 2022, regulated businesses include also the Acea Ambiente business, considering the strategic importance of this business and the regulatory evolution that we have been renewing in this area. Then these already mentioned by the CEO and the ones carried out last year are summarized in the bottom left of the slide. I'm referring to [indiscernible] [ TechnoServe ] surplus and the consolidation of the photovoltaic that actually started already in 2022. Let's move on to Page 6 now. And here, we see EBIT and net profit evolution. EBIT is stable, so flat. As we already pointed out, net profit compared with the previous year is dropping exclusively for the one-off impact of the disposal of the photovoltaic business that generated a capital gain of roughly EUR 21 million in Q1 2022.
The increase of EBITDA, the increase of depreciation due to the higher investment that is, again, a trend that the group has been falling, especially in the regulated businesses. And then we have brought forward the increase of financial charges, roughly EUR 8 million and then the capital gain that I already mentioned. So, provisions ratio of loss provisions has remained unchanged compared to Q1 '22. You may remember that in the second half of 2022, the group had reconsidered its strategy as far as credit losses are concerned. And such losses have increased towards the end of 2022. So, the current provisions -- loss provisions are perfectly in line with our expectations, and we have been witnessing an improvement of cash in performance. Page 7 some more color about CapEx. CapEx reached EUR 247 million in Q1 '23 -- and you can see EUR 11.4 million of finance investment.
And as you -- we are going to see going forward, we will see the grand funded investment having a substantial impact. Then you see that CapEx was driven mainly by the water business. As for energy infrastructure, we see a slight reduction. It's just a matter of timing, whereas all the other businesses are more or less stable. As of turnover that has improved, have contributed to the evolution of the cash flow. -- the reintroduction of general system costs also had a positive impact. You may remember that this item as the regulator suspended such cost this had a negative impact. Whereas now with the reintroduction of the general system cost, we have clearly a positive impact. We have already mentioned that the increase of financial costs that had an impact, of course. And then cash flow has been partially absorbed by the changes in the scope of consolidation, mainly referring to the M&A and the closing of the Deco deal.
Moving on to Page 9. Let's have a look at the capital structure. We already mentioned that net debt has reached [ EUR 4.338 billion ]at the 31st of March 23, down EUR 100 million roughly versus the 31st of December 2022. The ratio of 3.3x is lower than that of December '22 when it was at 3.4%. I'm turning of course, to the net debt-to-EBITDA ratio. The structure of debt is reported on the slide. The average cost is -- of that is 1.98 average term of 4.8 years. The increase of the average cost of debt is mainly related to the 2 issues that took place at the beginning of the year, and particularly referring to the green bond that was accompanied by a successful placement of a EUR 500 million green bond, a very competitive rates.
The [ Suez ] and Moody's ratings are confirmed with a negative outlook for both, whereas the sustainability ratings are stable and they are all reported on Page 9, bottom left -- sorry, bottom right. And now let's move on to the performance by businesses. Water business was very successful driving the group's results. EBITDA grew by 6%, mainly thanks to the organic growth of ACEA [indiscernible] and the changes in the scope of consolidation to include AMT Towards the end of 2022, the first stage of this deal took place. And now we have the Second phase, completing the transaction, leading to an increase of stake in a same journey to 45%, EUR 150 million investment in Q1 in the water business. And thanks, let's say, most of the grand funded investment I refer specifically to this business.
Page 11. We see the performance of energy infrastructure here. This business recovered the margins. EBITDA grew by 7% in the quarter. And this refers both to electric power distribution. -- whereas the public lighting was almost flat. Here, we have managed to increase the efficiency leading to organic growth amounting to roughly EUR 4.7 million. The replacement of meters with second generation electricity meters is still ongoing. The number of 2G electricity meters at the 3 of March has reached 725,000 -- number of PODs is flat. Total electricity distributed is slightly dropping. Page 12. Here, we find the financial and operational highlights of the ACEA Ambiente business.
Here, we witnessed a drop of EBITDA of 5%, and this is exclusively due to lower prices of the energy generated by the waste-to-energy plant. So, this applies -- I mean, both to electricity produced and to treatment and disposal. Abu already mentioned the acquisition of 35% of Deco, which is now owned 100% by the group and the acquisition of 70% of [indiscernible] in the province room operating the mechanical treatment and recovery of urban waste and on [ asada's ] special waste, and the deal was completed in October 2022. Moving on to Page 13. Here, we see the performance of the Generation business.
Again, here, the drop in the EBITDA is driven by lower energy prices and by the impact of the so-called sustaining decree, the impact was felt on the Santangelo hydroelectric plant. This business compared to Q1 2022 was impacted upon by the deconsolidation of photovoltaic assets that generated the capital gain that we already mentioned in Q1 2022. At the 31st of March 23, -- the total pipeline of photo plants has reached 877 megawatts, of which 20 are already authorized and under construction already to build, whereas the remaining part, 667 megawatts are awaiting authorization and installed capacity has reached almost 100 megawatts. And moving on to Page 14.
Here, we see the performance of the commercial and trading business. But as already mentioned, has managed to offset the negative items of the previous year. So, EBITDA has grown by 87%, mainly driven by increased margins on free electricity market and increased margin from gas and a good and effective energy management that has led to an increase of EBITDA of roughly the hole as related to an increase of EBITDA of roughly 14.7%.
And then Acea innovation also contributed to the increase in EBITDA, thanks to the completion of the energy efficiency projects that the company manages. Total energy sold is dropping. And this is part of a policy to contain the related risk. -- we observed at the same time, a slight increase of the customer base, which confirms the decision that was made to change the business mix and expand the customer base. And then you see as far as gas is concerned, the number of customers is slightly growing, and total gas sold has remained flat. So, the flow to year now, so the conference call -- I mean, the presentation is over, and we are ready for Q&A. This is the Chorus Call operator, and we now start to the Q&A session.
[Interpreted] [Operator Instructions] The first question by Javier Suarez, Mediobanca.
[Interpreted] overrepresentation. I've got a couple of questions, if I may. The first refers to the working capital and the evolution of the working capital in Q1. I'm referring to Slide 8, we see a positive contribution of the working capital. During the latest conference call, when you reported the full year results for 2022, you provided us with the guidance about the working capital, both the commercial and the regulatory working capital. So, I would like you to update us about the evolution of the working capital in Q1 '23?
And how this compares with your expectations for the whole of 2023? I mean, the guidance that you provided us, have you deviated from the guidance? So, this is my first question. Second question, I would like you to update us about your dialogue with the regulator about offsetting more quickly the impact of the price of energy. So, can you update us about the dialogue you have with the regulator to, again, try and recover more quickly the higher energy costs? And then the third question to the CEO is a more general question. Can you provide us with more color about your strategic priority both for energy supply and for water and water business.
[Interpreted] And then considering the assumptions that we had used for our scenario to calculate the probable working capital absorption. We had also included the risk of having the impact of higher energy prices also on the water bill, which is something that has not materialized so far. So -- and then -- these are the results compared with the assumptions that we made and let's say, the figures that we consider to make our forecast. And then we have the operational performance of the quarter generated by the actions put in place that the CEO mentioned. And then we have had an improvement of our turnover, especially in the energy market. Consider that Q1 has seen the deals cash in, and these were the bills that had been impacted by the highest price increase of 2022. So, let's say that the cash ins have been more than satisfactory, and the group has therefore benefited from this. So, I do know whether I've answered your question and then Fabrizio may answer the remaining 2 questions.
Well, first of all, as for the dialogue with the regulator -- we are still dialoguing with the regulator. So, I mean, the dialogue is ongoing, and it's too early to say where the dialogue will lead. Clearly, we are discussing with the regulator the overall topic that includes also, of course, tariffs. To date, we cannot say where this discussion will lead. However, this is something that involves other players as well. But again, the dialogue with the regulator is still ongoing. Coming to the strategic priorities. As you may know, a new Board of Directors was recently appointed at ACE.
And today, the first missing, the real missing of the new Board has taken place and the committees have been set up, which will enable us to reconsider our strategy going forward, which then lead to the new business plan of the group. So again, -- it's too early to say what the strategic priorities will be or the strategic choices will be -- in the 6 months that had been appointed CEO of the group, of course, I have had the time enough to have an idea of what we would like to do. But then, of course, everything must go through the Board of Directors first. We have definitely realized that the operational management is something that we are focusing on, which is clearly related to strategic priorities. And this means, first of all, managing revenues.
This group -- the group's revenues are accounted by regulated business at 90%. So, we are focusing on tariffs for all our business, water, environment and so on. Then cost efficiency, and we have already started a cost-cutting plan that implies keeping costs under control on the one hand and then identify the costs that are, of course, considered by the regulator, when discussing tariffs. So, I think that we have already started this activity last year, at the end of last year. And I believe the first results will be seen in this part of the year. And then CapEx, of course, we are focusing on the type of investment that is required, which investments are priority investments, which inevitably relates to the management of the cash, which means optimizing cash management in general and optimizing financial measurement in general. And then, of course, we will be focusing on the cost of debt. to limit the increase of the cost of debt.
So, to summarize my answer, we have to discuss and decide upon the strategic priorities with the Board of Directors, even though the management has already a clear ideas about this. Then from an operational point of view, regardless of the business plan, we are already acting on the 3 areas I mentioned, contain costs, optimize revenues and manage CapEx and cash efficiently. Thank you very much.
[Interpreted] Next question by Stefano Gamberini, Equita SIM.
[Interpreted] I've got 3 questions. The first about the end of the year guidance. I do know -- well, I must say, I haven't understood whether the guidance is concerned or whether it is improved to previous guidance suggested EBITDA between 2% and 4%. CapEx flat and debt-to-EBITDA ratio below 3.8x. So can you provide us with more color about this to understand whether the situation has changed after the Q1 as a consequence of the actions that you are putting in place. Second question, again about working capital. The working capital is, in fact, deteriorating. And I would like to understand whether there is an impact of the factoring towards -- compared with last year full year and the end of the first quarter, '23. And then third question refers to Commercial & Trading business.
I probably misunderstood you during the latest conference call because I understood that the fact that you were buying energy in the market, which would not support your profitability, whereas I've seen that the impact is completely different in Q1. So probably I misunderstood or I misinterpreted this. So can you help me and better understand whether I misunderstood you or whether the situation has changed now. And then again, we see EUR 7.5 million improvement of EBITDA of gas business with only EUR 90 million of cubic meters sold. Can you help me understand what it is all about? And what is the impact of gas on the performance of this business? And then I've got another question about the waste-to-energy plan. I know that this is a substantial investment, and the tender has not been awarded as yet, but how will such a relevant investment be managed considering that you have to keep the leverage under control. So thank you very much, and I do apologize for asking so many questions.
[Interpreted] Well, thank you, Stefano. I'll try and answer your questions about the working capital, on the price dynamics that you mentioned. As for the working capital, the performance in Q1 is positive. -- and substantially so probably with our explanation, we haven't been clear, and we have led to this misunderstood misunderstanding the compared with the traditional trend of the group, there is continuity, let's say. So as for the use of these instruments, Well, we haven't increased the use of these instruments. As for factoring or reverse factoring activity that you mentioned, there's nothing of this kind that we have done in Q1. So, the performance is driven by the factors that I previously mentioned, namely reduction of the energy price. So, reduction of the energy price that the group buys, which has limited the exposure. And comparing this with last year, these had been particularly penalizing as an item.
And I also would like to refer to the energy price. You may remember that starting 2022, we have gone through a strategic change as far as the energy supply is concerned. So we have shifted progressively from this called fixed supply to the variable price supply. Q1 2022 in Q1 2022, the variable price supply -- sorry, the fixed price supply was, of course, accounted for the larger share because we were just beginning the transition. And in those days, there was this mismatching. Even though the coverage that was in place was not completely efficient. So small quantities of energy purchased on the spot market at a very high price led to this substantial absorption.
Today, in Q1 '23, we can consider, and I'm not mentioning the exact figure, but we can consider the following big mix. So, 60% of our energy supply is now based on variable price supply -- and this has, of course, enabled us to achieve a more balanced -- more balanced situation. And then the element that we mentioned, namely the purchase of energy at a variable price, which implied shorter payment terms, well, this is something that is still there, of course. If we compare the results with our expectations, well, the difference is mainly due to the substantial drop in the energy price reported in Q1. So, I hope I've answered your question about working capital and the energy supply price. And I ask [ Dasso ] to answer the question about the guidance.
[Interpreted] Well, as for the guidance, we confirm the guidance given we are definitely working on this, which I believe is mirrored by the results that we are commenting today. But let's say that to date, the guidance is confirmed.
As for your question about the WTE plant. We -- as you might know, we made our bid -- of course, if we are awarded a tender, we will have to commit ourselves. Currently, we are still talking about a call for bids. So, we are still waiting for the commissioner and the engineers that we have been appointed to comment on our offer once we have received the comments by the technical team and by the commissioner, the final project will be drafted and then, of course, we'll be submitting -- I mean we'll be bidding for it together with other players. And at that point, of course, we will be knowing what the final project implies both in terms of time line and costs involved. As I said, we are going to bid, but this will have no impact on the financial structure of the company. And the first preliminary bid that we made was agreed upon with our financial partners. Of course, we cannot mention figures, but we consider this cost for bid as a good opportunity for the group from all viewpoints -- we'll be keeping you posted about the evolution of this tender, of course.
[Interpreted] Just a follow-up question. Fabio, can you help me understand the EUR 7.5 million that generated by the gas business. Is this a one-off item? Or is this a recurrent item.
[Interpreted] Well, it is an item that is generated by the margin recovery, which is a result of a greater energy efficiency. If you compare this with Q1 2022, it was Q1 '22 that was particularly penalized in terms of prices. probably I can say that here, there is, if you will, a one-off item that is simply the stabilization of gas prices, which I believe will continue also in the next quarters. All right.
[Interpreted] Next question by Emanuele Oggioni Kepler Cheuvreux.
[Interpreted] My questions have already been answered. So, I would like to ask you a very quick question about the [ ASM Turney ]. -- consider that you have closed the deal recently. Can you update us about this still how this will contribute to the group's results -- and when do you think the new business plan with the updated guidance will be ready? I'm talking about the guidance, but I'm particularly focusing on the debt and the debt-to-EBITDA ratio. So will the new business plan be ready by -- before the summer or by September next.
[Interpreted][Operator Instructions]
[Interpreted] Well, I don't know whether you can hear me because I was answering the question about the ASM attorney, -- just to provide you with more color about this deal. Actually, we hadn't considered a financial contribution deriving from this deal. This is just an exchange of shares. And the idea is that of consolidating the business in the Umbria region. As one manages integrated water services, public lighting gas distribution -- and so with the recent deal, we are now at 45% stake, and we control the governance of the group. And the purpose is that of making the business evolve by fostering the growth of the services provided and of course, by achieving synergies. The contribution in 2023 has been estimated at roughly EUR 9 million. I don't know whether Fabrizio would like to answer about the -- or reply to your comments about the guidance. about what [ Mr. done ] said is absolutely correct.
[Interpreted] The guidance remains unchanged. As already pointed out, clearly, all the actions that are being put in place clearly show that the group is trying and improving all the ratios, indeed, starting in last year and end of last year. And I believe that the full year results last year have already shown that some improvement has already been achieved. And this has enabled us to reach targets that have been set for 2022. -- which otherwise would have been negatively impacted by all the events that took place last year. For the time being, we confirm our guidance. And the idea is that of focusing on operations to, of course, the control all the operating items. Considering the current market conditions, a very rigorous financial control and operational control essential.
Mrs. Angrisani, ladies and gentlemen, for the time being, there are no other questions. Thank you very much.
[Interpreted] Thank you for connecting the Investor Relations department is clearly available to answer all your additional questions, if needed. Thank you very much, and have a nice evening. Goodbye... You can disconnect now. Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]