Snam SpA
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This is the Chorus Call conference operator. Welcome, and thank you for joining the Snam 2021 First Quarter Results presentation. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Alessandra Pasini of Snam. Please go ahead, madam.
Thank you. Good afternoon, ladies and gentlemen. First of all, let me apologize for this slight delay. We has some issues in uploading the presentation on the system. So good afternoon, and welcome to Snam Third Quarter 2021 results. During the first quarter of the year, that continues to make good progress in our core business. Investments are above 2020 level, and we are progressing towards our EUR 1.4 billion of full year guidance. Our efficiency plan achieved EUR 64 million of cost savings versus 2016 baseline new regulated services are in line with the good result of 2020.
A consultation document on the organization of the metering activity has been published. It introduced quality standard level paying the way for an upgrade of the system. We're working with RINA to formalize the certification on H2 readiness of infrastructure.
Looking at the quarter results, we continue to build and enhance our capabilities in hydrogen. Enlarging our team and leveraging on our strategic partnership with De Nora. The good contribution from energy efficiency were partially offset by a slower ramp-up in biomethane both biomethane and energy efficiency experienced some slowdown mainly due to the effects of the pandemic. Approximately 40% of the Italian recovery fund will be dedicated to energy transition. Significant support measures are planned for hydrogen for slightly less than 4 billion environment, around EUR 2 billion in energy efficiency, circa EUR 20 billion.
On the international front, that first 10-year development plan has been approved by the regulator at the end of March, including new investments to help the country with lignite phase out. Investment for the Greek market are 65% above plan. That started to contribute with non results following the commencement of operation last November, financial completion was achieved in March. Therefore, allowing the release of the guarantees provided by shareholders during the construction phase.
On our debt management, financial charges were lower than the same period of last year, thanks to the supportive market environment and our 2020 liability management exercise. We are progressing towards our end plan target of reaching 60% of sustainable finance out of total available funding. And as of 30th of March, we are already at 50%. This is part of our broader and continuous engagement with investors and stakeholders around ESG as confirmed with our recent dedicated roadshow.
Our financial results in the first quarter continued to show growth. In order to allow for a better assessment of the group performance, consistently with done in our full year results and offering greater comparability of data, the pro forma income statement of the first quarter 2020 has been prepared. Assuming that from the 1 of January 2020, the effectiveness of the changes for the unaccounted for gas as defined by the regulator in its deliberation of December 2020, this means we have netted approximately EUR 12 million of EBITDA contribution.
EBITDA benefited from the contribution of higher tariff RAB, thanks to investments on our infrastructure and ILO D&A counterbalanced by the phasing out of older input-based incentives, while the contribution of auto-based incentives remained stable year-on-year. The decrease in the business' EBITDA versus the same quarter of 2020 is mainly linked to continuous investment from the platform and a lower -- biomethane offset by energy efficiency, as I will explain later.
Financial charges were down by EUR 10 million, thanks to the liability management exercise carried out in December and the continuing treasury optimization measures. Finally, income from a sources were up by EUR 17 million compared to last year, benefiting from the inclusion in the perimeter of ADNOC and De Nora and the contribution of TAP. These positive effects are partially offset by the expected decrease of our Austrian associates, mainly due to the new regulation in place from January and therefore for lower unitary tariff due to lower WAC, higher volumes and the reversal of the recoverable difference, strong contribution that we have achieved in the past years.
Net profit was overall up by EUR 24 million, thanks to these operational results, lower financial charges and strong contribution from associates.
Getting into more detail, net profit for the period was EUR 313 million. This was driven by the core EBITDA contribution of EUR 6 million due to higher revenues, thanks to the continuous investment in transport, only partially offset by a reduction of input based incentives, as mentioned before, and storage revenues due to lower capitalization in 2020, which is expected to be recovered starting already from 2021, a flat core business costs year-on-year.
The contribution of new businesses were negative for EUR 2 million. This is due to the continuous investment in our H2 capabilities and sustainable mobility. The effect of a very strong global solution performance in the first quarter of last year, which accounted for EUR 1 million. The announced contribution of our energy efficiency businesses due to the consolidation of niche devolve and thanks to the residential sector initiatives and the slower-than-expected ramp-up of our biomethane business, mainly due to delays in the authorization process.
We expect the new businesses to gain momentum in the next quarter with a growing contribution compared to last year. Lower net interest expenses of $10 million were due to lower cost of debt attributable to both treasury management optimization, the RAB loan rollover effect and benefit from the liability management exercise of December 2020. The increase year-on-year of the contribution from associates, mainly due to a premier effect with the contribution of ADNOC included since July 2020 and De Nora, which was closed at the beginning of this year. And the positive contribution of staff that in first quarter last year was loss-making being filed under construction. Including taxes are mainly due to the introduction of action, higher income from associates and, of course, higher earnings before tax.
Turning now to our cash flow. Cash flow from operations for the period amounted to EUR 243 million, including EUR 210 million of working capital absorption, of which EUR 140 million related to balancing and settlement activities, around EUR 70 million of which will be recovered in the coming months and other working capital items, of which EUR 90 million of net tax payable, the absorption due to non RAB gas for the commodity revenues component, which will again reverse in the coming months. And around EUR 60 million of absorption of capital related to the receivable for the Ecobonus on the residential sector.
Net investments and M&A included CapEx and CapEx payables for about EUR 200 million, and M&A activity related to the acquisition of the De Nora sale that was completed in January, the cash in from all and the cash in resulting from the entry of CDP equity in the platform of our energy efficiency. Other outflows in the period has clearly been related to the interim dividend payment, which occurred in January, equal to EUR 323 million. This led to a net debt at the end of the quarter of EUR 13.7 billion. We confirm the full year guidance of circa EUR 14 billion with neutral tariff-related and balancing working capital effects and including the effect clearly of De Nora acquisition.
Moving on to nondestructive and the reduction in the cost of debt. In the first quarter of 2021 will further strengthen our financial structure by leveraging on optimal condition for about 750 million dual tranche transition bonds issued in February 2021. This transaction, together with the recent liability management exercise, contributed to a reduction to below 1% of the cost of debt. Moreover, with respect to treasury management optimization, we continue to experience good market conditions allowing us to fully utilize our EUR 2.5 billion of euro commercial paper program and a large use of uncommitted credit line, both at deeply negative low. On sustainable finance, ESG focus has been crucial for our financing choices. As of today, our $2.5 billion commercial paper program is fully utilized under an ESG label format and on back capital market, we have increased the amount raised to position bond by EUR 750 million, further highlighting the focus that we have on ESG instrument.
Finally, we're proud to be awarded the Environmental Finance in the Board -- in the Bond Award 2021 award for innovation. This represents for an important recognition of our focus on sustainable finance strategy and encourage us to work with even greater determination to increase the share of sustainable finance as part of our overall committed funding by 2024. Following the amendment of non bylaws in February 2021, all the withdrawn shares amounted to approximately 0.3% of the share capital has been fully allocated through the exercise of option and preemption rights in April '21, with a significant over attrition pointing out investor confidence now strategy. We thank you for the attention, and we are now ready to take your questions.
[Operator Instructions] The first question is is from Mr. Javier Suarez of Mediobanca.
The first one is on the numbers. You can give us the details on the contribution by the different activities to the to the equity consolidation line, if you can give us a contribution from the different companies, that would be helpful. Second question is on the hydrogen opportunity, hydrogen related development. So the question here is that you can give us a latest update on hydro readiness of -- hydrogen readiness of your network? And also any ongoing conversations with that regulation on the recognition on hydrogen related investment in your regulatory framework.
And the third question on government-related issues and the coming simplification decrease and the recently presented recovery plan, which are the implications from this -- through things for a company like Snam.
So regarding the first question on contribution of our associates. We -- in the first quarter of 2021 we have seen the contribution for around EUR 5 million is coming from ADNOC, EUR 15 million coming from TAP. It's broadly consistent with last year, with EUR 1 million to EUR 2 million EUR of [indiscernible], EUR 5 million for DESFA, EUR 10 million for Teréga and above EUR 15 million for TAG. So these are the numbers on our international Italgas, I'm sure you can see. And for De Nora, we are accounting for around $4 million for the first quarter, which was not present last year.
The second question on H2 readiness. Our assessment remains what we said before. We consider approximately 70% of our grade already H2 ready. As mentioned in the presentation, we're working with RINA to get the certification around this readiness, which is ongoing, and we is progressing well to achieve completion. We continue to work on the storage side of things, again, as we said in the past, the study on the readiness of our storage facilities is ongoing. We hope to be able to give some indication on this by the time we will come out with our strategic plan in November. It's taking -- it does take longer because it's more complex than just pipeline.
When it comes to recognition of investment by the ARERA and dialogue with ARERA. I think the regulator is very supportive of the role the green gases will have going forward, point number one. And that clearly is very much supportive of what we have been doing. I think it's too early to get into approach to recognize investments in hydrogen-related projects. And this is not just a comment that applies to ARERA. It does apply to all regulators across Europe. At the same time, there is a consistent support by all regulators across Europe in the need to make sure that infrastructural support is going to come for the -- to support the demand for hydrogen that is underpinned by all the hydrogen strategies that have been published and that are now being started to be followed with actions. And the recovery plan is fully the most immediate next step that we can see, the fact that the recovery plan, which leads me to your question, includes approximately, I think, slightly more than EUR 3.5 billion dedicated to hydrogen-related project.
It's a very tangible and concrete example and sign of the support that Italian government is willing to give to the start-up of this sector. And so we are very positive because what is in the recovery is very consistent with our strategy, with our vision. As you know, the recovery will provide both incentives and grants that will need to be attributed to specific projects going through public tenders. And we will look at those. But I think a concrete or a more detailed indication of the impact of the recovery came in on our CapEx fund is an effort that will come at our plan in November. I think it's too early now to give any specific indication. Clearly, as you know, the recovery implies or requires that capital are earmarked for projects in a very tight time frame and spent equally in a very tight time frame, which is only a positive message, i.e., when it will start, we will expect the evolution of projects to be on a faster path, if you want.
The other element that may come is a possible simplification from authorization processes. But this is something that is not in the number, this is something that hopefully will come together with the recovery, but that's part of an ongoing institutional value that we have, and we have nothing specific to add on this currently.
Next question is from Harry Wyburd of Bank of America.
I have got 3. The first one, it's just on the De Nora stake. And I know that you've been mentioning for a while now that you're considering options for that stake, perhaps spinning it out into some kind of funds. I guess, just as a general observation, there's a lot of new equity being issued sort of globally at the moment. So I wondered if you had any thoughts on timing of whether you might sort of spin that out into some kind of maybe listed or nonlisted entity, whether that's something we could expect for this year and whether you're sort of looking at what the market is doing there? And could there be sort of quite a short-term window where you could perhaps achieve a nice valuation for it? And does that mean that you might move relatively quickly or you quite relaxed?
Second one, just a very brief follow-up to one of the earlier questions, and apologies if I missed it, I got disconnected briefly. But can you tell us if you haven't already, how many specific projects you've actually included in the -- for the recovery plan. So I caught that you mentioned you can't say well, it's going to -- what impact it will have on your CapEx program. Are you able just to tell us which projects you've submitted as part of the -- or recovery similars funding? And then the final one, it's become a very generic question, but I wondered if you could just update us on whether you've heard anything more recently on the regulatory review. I don't know if you've had any discussions with the regulator in the last few weeks? Or whether there's been any change in your outlook for that?
Thank you. So on De Nora first. First, let me start with, but we're very pleased with our partnership with De Nora, both from an industrial standpoint and potentially, of course, from a financial standpoint. We are more focused on the financial consideration around it, which are clearly very important, but let me actually start with industrial consideration on how strategic that partnership can be for us as we get into this wave of investments and start-up of the hydrogen ecosystem towards week De Nora and also exposure will clearly be very helpful for us.
We will be -- yes, we indicated this platform, but leaving aside the platform, as we said in March, we will be open to evaluate our options on this to enhance not only, as you said, the strategic -- the financial value, but also the strategic value of the more the market is clearly very supportive of assets in the hydrogen space. We were reading yesterday on the press. There's news related to system under JV. We are in touch with all stakeholders that are going to be relevant party to the possible next steps. So only very positive messages, but we're very relaxed. And at the same time, we'll continue evaluating our options.
On the specific projects, I think the IR team will share a presentation that was given at our parliamentary auction, I think, a couple of weeks back or so. You will have some more indications. Clearly, we see a number of projects that could be relevant for us, particularly around the hydrogen space. But overall, we think the recovery plan is very conducive because all of these measures have been included, both in the recovery and the supplement fund, particularly when talking about the energy efficiency, will underpin further growth for us as well as for others.
It's just very positive for the sector in the energy transition space. When it comes to regulation and update, on the replacement, the detailed dialogue with regulator on the different principles that will dictate the priority ranking, if you wish, before will give a more granular approach to replacement factor and pace is ongoing. We are targeting, as we said before, this to be done during the course of 2021. I don't want to commit to a specific timing, only we are sure that the dialogue is ongoing, and we are -- and it's very constructive.
When it comes to the WACC, again, we expect shortly the beginning of the process. We are comfortable on 1 side that the regulator is very much aware of the specific nature of the environment which we are in. And I think we are also comforted by the fact that this is a review that applies to -- as we all know, to the De Nora space and not just to us. But nothing more, nothing less than what we said in March on this because the real dialogue with them will start for in a couple of months' time or so.
The next question is from Enrico Bartoli of Stifel.
Three questions also on my side. First of all, on the revenues from the new businesses, actually, they more than doubled in the Q1 compared to last year. If you can guide us on the evolution that you expect for the full year and on the contribution that you expect to EBITDA as well. Second question is related to DESFA. You mentioned the approval of this new 10-year development plan. If you can share with us some details in terms of the CapEx plan that is involved, and the expected RAB growth that is implied by the new plan? And the last one is on the buyback. In the press release, you mentioned that the shareholder meeting approved the new program for the next 18 months, if you expect to activate some repurchases of shares soon?
Okay. So on the new businesses, it's -- clearly, you see year-on-year, the effect of the change in perimeter. I think roughly half of the delta is just the change in perimeter coming from niche Evolve. The overall revenue will be fairly significant because of the strong sector contribution on the deep renovation front. And starting from the EBITDA, which I think is important. We expect EBITDA coming from new businesses, all of them being comprised between EUR 15 million and EUR 20 million. Of course, we will be trying to be closer to the top. But that's a range that we feel comfortable in given, which is consistent with what we expected before. The mix is going to be, as I said in the commentary, a strong contribution from the energy efficiency ramp up. This is very strong contribution on the residential space for deep renovation and some lower than we expected, but more than acetated on overall contribution coming from the public sector.
Why? Because the post pandemic situation has slowed down the award of new tenders in the public space or some communicated. And at the same time, for example, when you have energy management services with schools. Schools have been closed, just to make one quick example, it has been weaker than it could have been a normal environment. The biomethane is going through a ramp-up. So we will recover the slowdown that we are seeing in the first quarter. But at the same time, as I commented, the part of -- a good part of this slowdown is due to delays in obtaining the authorization for the plant. We will do our best to recover this during the year. If not, you will see the benefit next year.
Year-on-year, you will see a normalization of the contribution from global solution, which was very strong in 2020 due to a very important contract that was related to the construction of cap, which effectively got almost completed by the end of 2020. So hopefully, I'll help you going through the business that are contributing. And then, of course, we continue to invest, as we said, both on the mobility side and on hydrogen, which is still in a ramp-up phase before we see the contribution at EBITDA level. In terms of DESFA, the overall CapEx plan, we're talking about out of memory, above EUR 500 million -- I think EUR 540 million overall CapEx plan. This is 65% more than the prior 10-year development plan when looking at projects related to Greece.
As you know, Grace can become -- and this is one of the strategic reason why we like it so much, a very crucial gateway for flows coming from different regions. And that could potentially lead to additional investments, which are not included in the numbers I've just given you. Overall RAB of DESFA, I think last data that ahead was slightly less than EUR 800 million, give or take. Share buyback, that's just business as usual. We'll simply renew the authorization. We have no specific plans already on what to do. We're very happy with the way our performance, our stock has performed. But we may utilize it because we always find a very smart way to use our flexibility in a way and enhance the illumination of our shareholders at the same time. But just to be clear in our guidance, there is the assumption of no buyback. And if we will do some buybacks, that would be on top when talking about the net debt guidance.
The next question is from Chris Laybutt of Morgan Stanley.
I just had 2 questions. The first being just the impact of the aid to economic growth on your effective tax rate. I'm just wondering whether you can give us some details on where you think that might impact things in the current year and the years ahead. And Alessandra, you also mentioned the impact of unaccounted for gas, which can sometimes be a bit tricky in regulated gas networks. I'm just wondering whether you could give us a little bit more detail. And to be honest, I missed the comment. So I'm just hoping you might be able to repeat them for us.
Okay. So the first question was around how you link tax rate with growth? Sorry, I'm not sure I got it.
Just in terms of -- in the press release this morning, it looked like your effective tax rate might be lower this year because you've got a benefit coming through from the aid to economic growth package and just where that might end up.
Okay. No, that was something that was not -- we're talking about the action hold. It's a specific tax measure that was not present in the first quarter of 2020. Then it has been introduced in the later quarter and instead has been providing benefit in the first quarter of 2021. I think in April, there's been an additional measure. So there may be a further benefit to what was planned. But it will be probably consistent with what we had last year. These are temporary measures. So we know if we will get it for 2021, we'll need to see where they will continue. So take it as a temporary effect, not a structural effect.
And the other element that, of course, is impacting our tax rate is the higher contribution from our associates, which, of course, get different tax treatment versus the traditional corporate tax apply to our existing businesses. So hopefully, that addresses your question, correct?
Yes. Yes. And unaccounted for gas was...
I'm getting to the non accounted to -- I was just -- wanted to make sure that I did answer your first question. So let's say, more generally, it's energy cost to the point that has been addressed by the regulators. So since January 2020, energy costs are recorded both in the revenues and in the cost line. However, in the first quarter 2020, they had a temporary positive seasonal effect, mainly related to the volumes connected to the undercounter for gas. In December, there was a resolution, sorry, by the regulator, where it did introduce a mechanism to serialize this and accounted for gas effect.
The 4 leading an incentive-related to the difference between the unaccounted for gas recognized for a given year and the actual unaccounted for gas. But in fact, we were talking about pinus. I mean the big gap is the sterilization of -- or having this energy cost accounted for both revenues and costs. We are just neutralizing things that we already had on a full year basis at December, but we didn't have in January 2020. And so when comparing the first quarter to the prior first quarter, you would have had not like-for-like reader across vis-à-vis what we do from now onward, thanks to the new regulation that has been introduced by ARERA in December 2020.
Okay. And all of this impacts your P&L? Or is it working capital? I assume it's P&L.
No, it's a -- let's say, it's effectively neutral with maybe couple of million more or less, which depends on the actual price-related to the accounted for gas and a forecast -- that you forecast versus the actual that you actually account for.
The next question is from Antonella Bianchessi of Citi.
Just a quick question. Can you just provide the split of your CapEx, letting us know how much of them are going into the RAB and how much is nonregulated? And also, can you just give us a little bit of a guidance on as not. So not only the contribution for this year to be earnings, but also the debt and the cost of the debt of this -- the amount of the debt and the cost of the debt and if there is any risk of a change in the financial structure of this company. And finally, if you can give us a little bit of guidance on the tax rate for the full year?
So let's start with the CapEx, please. The CapEx that has been, as we said, is EUR 231 million for the quarter, Antonella. Of this, more than EUR 220 million are RAB. So the CapEx related to the new businesses are marginal in a way. On a look on a yearly basis, we expect, as we said, when we announced the acquisition to have a contribution around EUR 15 million, give or take, more or less. We have also completed the refinancing completely of the bridge, and it's a debt package that is amortizing over, I think, a 10-year horizon. But there are no -- maybe I misunderstood your question. But aside from the acquisition that was made is also fund the business, there is not going to be any further debt impact related to ADNOC. But maybe I understood your question, Antonella, on ADNOC. Sorry, Antonella, did I respond your question?
Sorry. No, I was wondering how -- which is the structure of the debt of ADNOC because I remember it was pretty high. And if you can quantify the number, and give us an idea on the cost of this financing?
The debt was around EUR 8.236 billion and is all being refinanced in the capital markets and with a weighted average life of 10 years. So it's a very long-dated duration. When it comes to the tax rate for the year, I think we are in the 25% range on a '21 full year basis.
The next question is from Stefano Gamberini of Equita SIM.
A few questions from my side, if I may. First of all, regarding out based incentives. Could you remind us what is the level that you expect in 2021 and the target at the end of the plan. And the question here is when you expect the deregulator reach the final decision about the fully deposited assets, and the possibility to give you output-based incentives on this topic? Could this arrive in the same time when the regulator will set the lower WACC, that's clearly my first question.
The second, still regarding the allowed WACC, considering a reduction of -- we will see how 50, 60, 80bps in the WACC? Do you see some risk regarding your dividend policy to 2024 due to the increase in debt on RAB level or otherwise, you don't see any risk on that? The third, if you can comment about the EU decision about taxonomy, I mean to exclude the gas transport and distribution from taxonomy, what changes do you expect? And in this case, you disclosed during the last presentation of your business plan, that CapEx were eligible for taxonomy in the region of 40%, if I'm not wrong, with these changes something could impact or not?
And sorry for that very last question regarding a brief comment of what happened in Germany, where the regulator decided that the gas transport distribution could not subsidize the hydrogen at these 2 regulation should be kept separated. So in this case, do you see some risk of a similar decision also in Italy and what are the risks for Snam in this case.
Thank you. No. So let's start. Auto based incentive, we have an expectation to land approximately what we did land last year. Last year, we paid EUR 18 million. So roughly, give or take, that's the same number we assumed for this year. On fully depreciated assets, as I mentioned before, we're working towards hopefully having news for next year -- sorry, this year plan later in November. The work is ongoing. There is no specific deadline that has been committed.
On the WACC, clearly, the WACC will be a process that will go through the summer to the fall. And so that more or less the time line that we have in mind. If you do the mark-to-market today, you get between 5.1%, 5.2% on transportation. And that -- I mean, a rule of thumb, every 0.1 delta means around EUR 20 million of revenues. So if you want, just to make an easy math, the spread clearly has been compressed both by the liquidity and by the positive environment related to the current government being inform.
At the same time, there is the recognition of how much excess liquidity has been inundated the market and, therefore, inflating in terms of improving the overall credit spread and conditions. So these are elements that will clearly be assessed as part of reviewing the formula during the course of the summer. In terms of risk to our dividend policy, absolutely not. Our payout, by the end of the plan, is very solidly within the 70 to 80 bandwidth, even assuming for the downward provision of the WACC.
When it comes to taxonomy, let me explain that it hasn't been decided to exclude. It has been decided to leave it out for the time being, which is actually a positive message away in the sense that we do expect no changes to the taxonomy. And therefore, we will not expect the message to be different for what we told you before or 40% of our CapEx. By the way, on a conservative assumption basis and how we have defined them to be compliant with taxonomy. I think everything which has been coming out from the commission and from the different governments and underlines the strategic role that the gas infrastructure will need to have in order to comply with the transition and the role -- the growing role that green gases will have, again, is something that is getting stronger by the month, not weaker.
This leads me to the comments you made on Germany. Again, we see that as an upside because what that is saying is basically that today, there is a need of hydrogen from one point to the other. And I'm talking about replacing gray hydrogen with free hydrogen and making rather than bringing it via trucks, creating infrastructure system that can actually provide supply to that demand, that's something -- that's a new business opportunity that PSOs like us can actually pursue, which today was not part of investable projects for us. I think what what the message that has been passed by the -- by the way, the proposal isn't yet something that has been approved by the department. As you know, there are elections. So we'll need to see where it lands. But I mean, today, the reason why it was made this way was to make sure that there was a fast ramp-up of infrastructure because they expect a fast ramp up also in the back of the recovery from demand of hydrogen.
So again, it's more a positive and a negative for us. As we said, 2021 will be a year where the European Union will land towards a more cohesive views on how to support hydrogen, the hydrogen ecosystem. And then the regulators will get in action in terms of how to approach this. But this is more related in my mind to new investments rather than what we've been talking now in so far, which is simply maintain our existing network to be able to transport green gases.
The next question is from José Ruiz of Barclays.
I just have 2. First of all, just to confirm I understood the previous answer, you're basically saying that the first consultation paper on the WACC methodology will come very soon. Is that correct? And secondly, last year, about the timing of incentives for hydrogen, you were basically saying that the debate about the schemes, incentive schemes for electrolysis would take place this year. And regulation about the transport of hydrogen will take in a period of between 2 and 3 years. So we are in 2021. And funds will start slowing by the end of this year. Have you -- are you aware that there is any debate about these incentive schemes for electrolysis?
So on the WACC consultation, we expected before the summer. So it couldn't be end of June, July, I mean, more or less around that time frame. On incentive schemes, maybe we were not completely clear or you didn't guard it in the right way. I mean, we expect, first, Europe to take a more consistent use of what to incentivize. And what I mean by this is because incentives will need to be compliant with the state aid regulation. So -- and that's always going to be the case. I mean that's applied to every incentive. And so there will be a new view around what to incentivize and how. And that will determine how much you actually supply-demand versus -- sorry, much incentivize demand versus supply. And so just getting to what you are saying, how much of these incentives goes towards the renewable utilizer part of the, let's call it, upstream versus the offtaker of that hydrogen.
This is something that is not yet defined, and we expect it to be clear. Second part of this year, beginning of next year. I mean, this has all been discuss an approach at also a different state. The recovery is going to provide support on the CapEx level. But at the same time, if you read what is happening in Germany, Germany is talking about introducing contract for difference, which is basically an OpEx scheme, which will give to offtakers incentives that will cover the delta between -- just to make one example, the cost of gray hydrogen today and the cost of green hydrogen today, net, of course, of the benefit from a CO2 emission. So there will be a number of variables that will come to a cohesive package. And from the time being, we're only seeing bits and pieces here and there. But surely, during the course of this year, we will get a much more coherent vision.
Also, we need to see whether as we even hear, there will be an approach to carbon tax and the certification of brain molecules, certification of origin. So it's going to be a fairly complex measure because people expect a very significant contribution and support coming into the space. And therefore, again, this is just going to be a positive evolution, but probably it's too early now to give specific numbers to either the production side or the OpEx side.
Sorry, if I can follow-up on that. More specifically, do you see the Italian government following the same path as Germany. So basically putting the incentives before the funds from the recovery fund starts to flow, which I think is the correct thing to do.
I'm not sure that other counties are doing something different. I think Germany is equally looking at the recovery fund to kickstart the hydrogen ecosystem as much as Italy is doing. I think they are also going to look at funds under the IPSA umbrella, and that's a European program. It's something that is going to be available also for Italian French or a company the IPSA umbrella would attract additional funds different from the recovery and will promote projects where players from discern countries. Are all participating, not all are participating.
And so I think with maybe a couple of months delay, we are exactly following the same path that Germany is following. And there is no definitive vision in any country, I would say, of how much to incentivize, if not specific projects that are included in the national recovery plans, which ultimately will be awarded through tenders to possible promoters. And as we're thinking about public funding, these tenders will be open to everybody, and will therefore ensure compliance with the broader state aid regulation.
[Operator Instructions] Ms. Pasini, at this time, there are no questions registered, madam.
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