By Francesca Landini and Nina Chestney
LONDON(Reuters) - Italgas, Italy's biggest gas distributor, unveiled plans on Thursday to invest 7.8 billion euro ($8 billion) in its business by 2029, but its shares slipped as some analysts were unimpressed by earnings projections and dividend plans.
The company said the money, little changed from the 7.9 billion euros announced last year for 2022-2028, would modernise its network, strengthen its new Greek unit and expand its water and energy efficiency businesses.
Its shares were down 2.3% at 1430 GMT, underperforming a 0.4% decline in Milan's blue-chip index.
Speaking in London, CEO Paolo Gallo said he was surprised by the market reaction.
"The plan is quite complex and that's why the market might not have understood it properly ... I am sure in the coming days investors will appreciate the plan presented today," he said.
Italgas said it expected earnings before interest, taxes, depreciation and amortization (EBITDA) to rise to 1.18 billion euros this year and exceed 1.8 billion euros in 2029, with annual average growth of around 8% over the period.
Investors were probably disappointed by a single-digit annual growth forecast, said Gabriel Debach, market analyst at brokerage eToro.
An unexpected slowdown in public tenders on gas distribution in Italy was limiting the group's margins to grow its regulated business at home, Gallo said.
"We could see M&A opportunities [in gas distributions] in the coming years ... there are now delays in tenders which will be unlocked and the macroeconomic situation which is now in evolution should be more favourable in the future," he said.
DIVERSIFYING
Compared with last year, natural gas prices have fallen sharply and Europe has increased efforts to reduce the use of fossil fuels.
In this context, Italgas will spend 4.6 billion euros on its domestic network, but will also diversify its activities, devoting about 900 million euros to Greece and about 800 million to water and energy efficiency activities.
Italgas recently acquired three small water companies in Italy from Veolia and now plans to apply the expertise and technology it has developed in gas networks to water distribution.
Gallo said the Veolia assets could become a platform for more acquisitions in water, where the group is confident it can slash leakages.
The same strategy will also be used to increase profitability at DEPA Infrastructure, the newly-acquired Greek business where Italgas plans to serve 42 more municipalities, mainly in Athens area, and roll out smart meters by 2029.
The energy efficiency business will be hit by the end of a tax incentive scheme in Italy this year, but a recovery is expected during the plan with potential M&A activity.
Italgas also extended its dividend policy to 2026, saying it would payout 65% of earnings and guarantee a minimum annual growth in its dividend per share of 4%.
($1 = 0.9253 euros)