Market context and guidance

At national level, the ROSS tariff regulation for electricity distribution came into effect, based on the recognition of Total Expenditure for the sixth regulatory period (2024-2027). The WACC (Weighted Average Cost of Capital) increases to 6%, from the previous 5.2%.

During the 2024-2027 regulatory period, the Ross-base criteria will be applied in connection with distribution and metering activities, except as regards the recognition of capital costs pertaining to 2G smart metering systems, which will continue to be recognised according to the provisions of the Business Plan for Smart Metering (PMS2).

The cost recognised for tariff purposes includes:

• the remuneration and depreciation of investments carried out up to the cut-off date (FY2023)

• the fast money quota (opex)

• the slow money quota (RAB), based on which the remuneration of invested capital and depreciation are calculated

• "on top" non-compressible expenses (for example tax charges)

• the higher efficiency recoveries achieved during the previous regulatory period, left to the distribution companies during the four subsequent years according to declining rates

• the efficiency recoveries achieved during the new regulatory period.

The market context in this area shows a high “potential demand”, for example as regards landfill disposal, waste-to-energy, composting, biogas generation, the treatment of sludge and liquid waste, mixed material recycling and the production of “Secondary Raw Materials”.

The sector is also favoured by the trend in the Italian regulatory framework, which envisages incentive forms, by the regulatory support from European directives with regard to materials and energy recovery and by the European Union’s Circular Economy guidelines ("Closing the Loop"), currently being implemented in Italy under an enabling act assigning to the Government the obligation to revise environmental legislation to bring it into line with the new community standards. The guidelines on the Circular Economy are aimed at the recycling and recovery of materials, facilitating the development of new plant engineering in order to recover the infrastructure gap, particularly in the treatment of organic waste. For the treatment plants destined for “recovery or disposal operations” in reference to all urban waste, ARERA has approved the MTR-2 tariff method for the second regulatory period 2022-2025.

As regards Italy, in 2022 the National Programme for Waste Management (PNGR) was approved; this is a strategic tool to guide the Regions and the Autonomous Provinces in the planning of waste management, which establishes macro-objectives, macro-actions, targets and strategic guidelines to be followed in the preparation of Regional Plans for Waste Management (PRGR).

The PNGR covers a period of six years (2022-2028) and seeks to bridge the plant engineering gap, increasing the separate collection and recycling rate with a view to developing new supply chains for secondary raw materials from waste recycling, to replace the traditional chains, and contribute to the energy transition, based on national reconnaissance of existing systems.

We further mention that the sector offers growth opportunities also due to the availability of new technologies (for example composting) and the potential industrial integrations with other operators. Lastly, the expansion of potentialities as regards the disposal/recovery of sewage sludge – within the scope of value-added environmental services (sludge treatment, composting) – could lead to the completion of integration with the water business, preparatory to overall in-house management of the entire supply chain.