ERG: From Oil Refiner to Renewable Energy Champion — Italy's Most Radical Energy Transformation

I. Introduction: The Most Unlikely Green Giant

Picture the port of Genoa in 1938. Mussolini's Italy hummed with industrial ambition, and a young entrepreneur named Edoardo Garrone saw opportunity in the grimy business of refining petroleum and coal tar. He secured a license from the Podestà di Genova to begin processing crude oil derivatives in a modest facility on Via Romairone in San Quirico. The trademark he chose for his enterprise was characteristically playful—a die, or dado in Italian, an affectionate diminutive of his own name. On each face of the die appeared three letters: E-R-G, the initials of Edoardo Raffinerie Garrone.

It produces wind and solar energy and has operations in Italy, France, Germany, the United Kingdom, Sweden, Poland, Bulgaria, Romania, and the United States. As of June 2024, the installed capacity of the group's plants amounted to 3,754 MW.

Fast forward eighty-seven years, and that humble oil refining business has completed one of the most dramatic corporate transformations in European industrial history. In just over a decade, ERG has significantly transformed its business portfolio, anticipating long-term energy scenarios and successfully transitioning from an oil operator to a pure "Wind & Solar" business model.

Following its exit from the thermoelectric sector in 2023, 100% of the electricity generated by ERG Group comes from renewable sources. ERG is a successful example of how an oil operator can transform its business model to focus entirely on wind and solar energy.

How does a family-owned oil refinery that powered Italy's postwar reconstruction completely reinvent itself to become Europe's leading independent renewable energy player? What possessed a company that had spent six decades extracting profit from hydrocarbons to bet everything on wind turbines and solar panels? And why did this transformation succeed when so many others have failed?

As the foremost onshore wind operator in Italy and among the top ten in Europe, the Group is also active in solar energy production, ranking among the top ten operators in Italy, and in the battery storage sector.

The ERG story is about more than just switching fuel sources. It's a masterclass in contrarian capital allocation, the power of family business governance across generations, and the strategic wisdom of knowing when to exit a declining commodity business. In the parlance of Acquired's favorite frameworks, this is a case study in recognizing when your moat is eroding and having the courage to build a completely new castle on different ground.

Erg is 62.53% controlled by "SQ Renewables S.p.A.," a company that is in turn 51% controlled by San Quirico S.p.A. - the holding company of the Garrone-Mondini family - and the remaining 49% by IFM Investors. The company has been listed on the Italian stock exchange since 1997.

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II. The Garrone Family Origins & Founding Context (1938–1945)

The Garrone family's entrepreneurial journey began not with grand ambitions but with a modest trading license. Erg was founded by Edoardo Guida Garrone in 1938, founding a company for the refining of petroleum and tar. The company, which became a refinery after World War II, chose as its trademark a die (from "Dado," an affectionate diminutive of Edoardo) on whose faces is reproduced a three-letter acronym, the initials of Edoardo Raffinerie Garrone, or Erg.

The timing of the company's founding—June 2, 1938—placed it at a precarious moment in Italian history. Italy under fascist rule was preparing for war, and the petroleum business existed in a twilight zone between private enterprise and state direction. Young Edoardo Garrone navigated this treacherous landscape by focusing on what he understood best: trading and processing the raw materials that industry demanded.

The business initially dealt in oil derivatives and coal tar—unglamorous commodities, but essential inputs for an industrializing nation. The early years tested Garrone's resilience. World War II devastated Italian infrastructure, and the company had to survive on scraps of commerce while larger forces destroyed much of what industrialists had built.

When the guns fell silent in 1945, Italy faced the monumental task of reconstruction. Immediately after World War II, in a country in need of reconstruction, energy needs made oil a key energy source. Thanks to the favorable economic situation and the optimal geographical location of the plants, Erg's business experienced rapid development.

Genoa's strategic importance cannot be overstated. As Italy's premier port city, it served as the gateway for crude oil imports from the Middle East and North Africa. Any company positioned in Genoa with refining capacity could ride the wave of Italy's industrial reconstruction. The Garrone family ethos—pragmatism over ideology, adaptability over rigid planning, and long-term thinking over quarterly returns—would prove essential as the company evolved from a small trading operation into a refining powerhouse.

What distinguished the Garrones from other Italian industrial families was their willingness to form partnerships with international oil majors while maintaining family control. This pattern of collaboration without capitulation would repeat throughout ERG's history, culminating decades later in partnerships with Lukoil, Total, and eventually IFM Investors.

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III. Building Italy's Oil Infrastructure (1945–1985)

The three decades following World War II witnessed ERG's transformation from a modest trading operation into a genuine refining enterprise. Collaboration with Elf and BP to sell lubricants (produced by Erg's own plants in Savona) continued until 1996, when its own product was launched.

In 1956, a pivotal partnership emerged. In 1956, Erg signed an agreement to refine the oil on behalf of BP which, thereafter and for a number of years, will hold a minority interest in Erg's share capital. This arrangement—processing oil for a major international company while accepting minority investment—established a template that would serve ERG well across decades.

In 1963, 6.5 million tons of processed material was reached. This volume represented a massive leap from the company's postwar origins and established ERG as a significant player in Italian refining.

The 1960s and 1970s brought geographic expansion and infrastructure investment. During the 1960s and 1970s the company started to build some oil refineries and pipelines in Italy. Specifically, in 1967 Erg built a major pipeline in Arquata Scrivia; in 1971, it entered with other private groups into the shareholding structure of ISAB (Industria Siciliana Asfalti e Bitumi), a company created to build a large refinery in Sicily that began production in 1975 in Priolo Gargallo.

The ISAB investment proved strategically brilliant. Sicily's position in the Mediterranean made it an ideal location for processing crude from North Africa and the Middle East. The Priolo Gargallo site would eventually become one of Europe's largest refining complexes.

But the OPEC oil crisis of 1973-74 sent shockwaves through the global energy industry. For a family company like ERG, dependent on processing imported crude, the crisis forced serious reflection. Oil prices that quadrupled overnight revealed the vulnerability of refining margins to geopolitical forces far beyond any company's control. The growing dominance of Saudi Arabia and Asian refiners in processing technology began to squeeze European operators.

Despite these headwinds, the Garrones doubled down on their core competency while diversifying downstream. After developing business mainly in the refining sector, the Genoa-based company also began to grow nationally in the fuel distribution sector through its subsidiary Erg Petroli. In 1984, it acquired the 780 petrol stations network of Elf's Italian subsidiary and in 1986 1,700 stations owned by Chevron.

Thus grows the Erg Network, which adopts the brand characterized by the three rampant panthers. By the mid-1990s, Erg accounted for 6 percent of the Italian market in the field of service stations.

The expansion into retail distribution represented classic vertical integration—capturing more of the value chain from wellhead to automobile. But it also planted seeds of a different kind of corporate evolution. Running thousands of service stations required skills in branding, customer service, and retail operations that differed fundamentally from refinery management. The Garrone family was learning to operate as a multi-faceted energy company rather than merely an industrial processor.

In 1985, in anticipation of the closure of the San Quirico Refinery in Genoa, it took control of ISAB with a stake that grew over the years until it reached 100 percent in 1997. This consolidation of the Sicilian assets positioned ERG as a major Mediterranean refiner just as European refining would begin its structural decline.

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IV. Professionalization & IPO: The First Transformation (1995–2005)

The mid-1990s marked a quiet revolution within ERG's walls. After nearly sixty years of family management, the Garrones made a decision that distinguished them from many European industrial dynasties. From 1995 onwards, the Garrone family gave the Group's Management full responsibility for running the Group.

This professionalization of management—while the family retained strategic control—enabled ERG to prepare for public markets. Through a rationalisation of the corporate structure and aggressive re-focusing on the core business of energy, ERG prepared its listing on the Stock Market to create the conditions for more efficient funding of the new development phase that awaited it. The global offer consisted of a public offer for subscription and sale of 70.25 million shares in Italy and a private placement of 30.75 million shares reserved for domestic and foreign institutional investors. In October 1997, ERG stock was listed on the Electronic System of the Italian Stock Markets.

The IPO represented more than just access to capital. It imposed the discipline of quarterly reporting, analyst scrutiny, and public accountability on a family that had operated privately for six decades. Yet the Garrones structured the offering to maintain family control—a balancing act between accessing public markets and preserving the long-term strategic freedom that family ownership provides.

In 1994, ISAB Energy was established to build a plant to produce electricity derived from the gasification of heavy oils. More recently, in late 1993, an agreement between ERG and Edison Mission Energy, one of the world's foremost energy producers, led to the inception of ISAB Energy, whose mission was the construction of the first Italian heavy oil gasification plant for the generation of clean electric power. The innovative industrial project received about 1,900 billion lire of Project Financing, which was unprecedented in Italy.

This ISAB Energy venture signaled a subtle but profound shift in thinking. Refining petroleum was one thing; converting petroleum residues into electricity was another. On 18 April 2000, the ISAB Energy plant was commissioned: it is the first Italian plant and the third in the world for the gasification of petroleum residues and the generation of electric power. Its gross capacity is 512 MW and its estimated production is between 3 and 4 billion kWh per year, covering over 1.5% of the entire domestic demand for electric power. ERG a petroleum company, thus became a company active in the energy industry.

In 2000, Erg began producing electricity through ISAB Energy (a joint venture with Edison Mission Energy), with a capacity of 528 MW and an estimated production of about 4 billion kWh per year; the goal was to build Italy's first heavy oil regasification plant for electricity production. With this operation, Erg, from an oil company, becomes a "multi-energy" company.

The phrase "multi-energy" would become ERG's mantra for the following decade. It represented a strategic ambiguity that kept options open. Was ERG an oil company that happened to generate electricity? Or was it becoming an energy company that happened to refine oil? The distinction would prove crucial when the moment for decisive action arrived.

A few years later, in October 2002, Erg Raffinerie Mediterranee was founded, a company entrusted with the management of one of the refining hubs in Europe, achieved through the union and integration of Erg's ISAB Refinery with the former Agip refinery, both in Priolo. The integration of the two refineries took place through the construction of an oil pipeline system and other upgrades and improvements to production efficiency and environmental compatibility.

In late 2002, Alessandro Garrone was appointed Chief Executive Officer of ERG. In 2003, Riccardo Garrone left ERG's chairmanship after forty years. He was replaced by his first-born son Edoardo. This generational transition brought younger Garrones into top executive positions just as the strategic landscape was about to shift dramatically.

In 2005, Erg's stock joined the Blue-Chip segment of the Italian Stock Exchange, following the stock's significant increase in market capitalization. The blue-chip designation validated ERG's transformation from a family company into an institutional-grade investment—but the most dramatic transformation still lay ahead.

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V. The Renewables Gamble: Early Moves (2004–2008)

The year 2004 marked ERG's first tentative steps into renewable energy. The family, still operating under their "multi-energy" banner, began exploring partnerships in the nascent wind sector. Spain's booming wind market attracted their attention, and ERG entered a joint venture with a Spanish renewable-energy developer before acquiring an Italian wind company with assets in France.

In 2006, Erg acquired EnerTAD, a company listed on the Milan Stock Exchange that built and operated wind farms. The transaction marks Erg's entry into the renewables sector, again as part of the "multi-energy" strategy. Later, EnerTAD changed its corporate name to Erg Renew.

The EnerTAD acquisition was not a massive bet by ERG's standards—the company remained primarily an oil refiner—but it established a platform for future growth. The timing proved prescient. European governments were implementing increasingly generous feed-in tariffs and renewable energy mandates. The Kyoto Protocol was pushing utilities toward cleaner generation. Wind power, once dismissed as an alternative for idealists, was becoming economically competitive.

Subsequently to the EnerTAD acquisition, from 2007 Erg started to operate in the French and German wind markets, acquiring wind farms also in Bulgaria, Romania, Polonia and United Kingdom.

The geographic diversification was deliberate. ERG's management recognized that renewable energy subsidies varied dramatically across European jurisdictions. By spreading investments across multiple countries, they could balance regulatory risk while building scale.

In May 2008, a corporate reorganization consolidated ERG's renewable activities. ERG Power & Gas contributed its renewable assets into EnerTAD, which was then renamed ERG Renew. This created a dedicated subsidiary focused entirely on renewable energy development—a structure that would prove essential for the strategic pivot to come.

But the critical insight emerged from watching their core business deteriorate. European refining margins were compressing as Asian and Middle Eastern competitors commissioned massive, state-of-the-art facilities. The regulatory burden on European refiners increased while demand growth migrated to developing markets. ERG's management could see their traditional business becoming structurally less attractive even as renewable energy offered expanding opportunities.

The Garrones faced a choice that confronts every commodity business eventually: reinvest in a declining competitive position or redeploy capital to more promising opportunities. Most family companies in similar situations either cling to legacy businesses until forced out or diversify half-heartedly without committing to transformation. The Garrones would take a different path.

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VI. The 2008 Pivot: The Decision That Changed Everything

The summer of 2008 witnessed one of the most consequential transactions in ERG's history—and one of the most perfectly timed deals in European energy. In 2008 it signed an agreement with Lukoil, sharing the 49% of oil refinery in Priolo Gargallo.

Lukoil will pay €1.3 billion to acquire a 49% stake in a new JV with Italian refiner ERG. The JV will jointly operate ERG's Isab refining complex at Priolo, Sicily. ... LONDON, June 27 -- OAO Lukoil reported it will pay €1.3 billion to acquire a 49% stake in a new joint venture with Italian refiner ERG SPA.

2008 was the year of the agreement with LUKOIL, one of the most important agreements in the Group's history; through the incorporation of the "Newco" ISAB Srl (51% ERG Raffinerie Mediterranee and 49% LUKOIL), it led to a solid partnership in coastal refining operations. The agreement entailed transferring to Newco the business unit of ERG Raffinerie Mediterranee, which includes all the assets of the ISAB Refinery in Priolo, and the use of the same by shareholders for processing.

The €1.3 billion inflow from Lukoil arrived just months before Lehman Brothers collapsed. European refining margins, already challenged, cratered as global demand plummeted. Refiners across the continent would spend the next decade closing facilities or desperately seeking partners. ERG had monetized a significant portion of its refining exposure at peak value.

From 2008, Erg started a profound transformation process that led it to divest from the oil sector in order to focus investments on renewables.

CEO Luca Bettonte later reflected on the decision. The family wasn't motivated purely by environmental idealism. As Bettonte told Corporate Knights in a 2021 interview: "I can't say we made the decision because we wanted to save the world. But the idea to go green played a part in it." The fundamental driver was business pragmatism. The Garrones saw more attractive risk-adjusted returns in wind farms than in refining.

The strategic clarity that emerged from 2008 proved decisive. Rather than hedging their bets across multiple energy types, ERG committed to a clear direction: exit hydrocarbons, build renewables. The multi-energy positioning was evolving into mono-energy—just a different form of energy than the family had known for seventy years.

European refining's structural decline became painfully visible after 2010. In early 2010 TotalErg was launched as a joint venture resulting from the merger of ERG Petroli and Total Italia. At the beginning of 2011, ERG exercised the put option on 11% of ISAB S.r.l reducing its share in ISAB S.r.l. from 51% to 40%. With the current crisis in the refining sector, the transaction enables ERG to continue to maintain a significant industrial role in the sector in partnership with LUKOIL and in line with its multi-energy strategy, whilst further strengthening its financial structure.

In 2008, ERG sold to LUKOIL a 49% share in ISAB, with a so called "put" option. Following the exercise, in various tranches, by ERG of the put option, on 1st January 2014, LUKOIL became the sole stakeholder of ISAB.

The put option structure proved brilliant. ERG could gradually reduce exposure to refining while maintaining operational involvement during the transition. Each tranche sale monetized refining assets at pre-negotiated prices while freeing capital for renewable investments.

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VII. The Decade of Transformation (2010–2018)

The decade between the Lukoil deal and ERG's complete exit from oil witnessed a methodical, relentless transformation. In the meantime (since 2010) Erg grew in the Italian wind power sector becoming the leading wind operator in Italy in 2013. In seven years, between 2008 and 2014, the company divested assets worth €3.3 billion and reinvested €3.9 billion on renewables related activities.

That capital rotation—€3.3 billion out of hydrocarbons, €3.9 billion into renewables—represents one of the most dramatic sectoral pivots in European corporate history. The net investment of €600 million above divestiture proceeds came from operating cash flows and modest leverage increases, demonstrating that the transformation was self-financing.

The 2013 milestone deserves emphasis. Just five years after their first significant wind investment, ERG had become Italy's largest wind energy producer. The speed of execution reflected both aggressive acquisition activity and organic development of greenfield projects.

Italy-based refiner ERG has announced it will sell a 20% stake in the ISAB refinery in Sicily to Russian oil company Lukoil in a deal worth €400m. ERG's board of directors approved the exercise of a put option for the sale. By 2014, ERG had fully exited the ISAB refining complex, completing the transition from refinery owner to minority partner to complete divestiture in just six years.

Meanwhile, the retail distribution business followed a similar arc. In 2010, Total Italia and Erg Petroli merged to create TotalErg, a joint venture between Total (49%) and Erg (51%).

The TotalErg joint venture consolidated Italian retail operations while positioning for eventual exit. By combining with a global major, ERG gained scale economies and professional management while reducing its direct exposure to the fiercely competitive Italian fuel retail market.

In 2015 Erg entered the hydroelectric sector, via acquisition of E.ON's Italian assets, with 527 MW of capacity.

The hydroelectric acquisition represented a brief diversification within renewables. Unlike wind and solar, hydropower offered consistent baseload generation less dependent on weather conditions. The E.ON assets—19 power plants, 7 dams, and 4 reservoirs across central Italy—generated approximately 1.5 TWh annually.

In February 2016 Erg entered the UK wind market acquiring a wind farm project in Northern Ireland (45 MW) and completed the acquisition of eleven wind farms in France and six in Germany (206 MW).

The European expansion accelerated throughout 2016-2017, with ERG adding capacity in markets with stable regulatory frameworks. The investment thesis remained consistent: acquire quality assets with long-term contracted revenues, operate them efficiently, and generate stable cash flows to fund further growth.

In January 2018, Total and Erg completed the closing with Gruppo API regarding the sale of TotalErg, and Erg completed its industrial transformation process towards renewables.

Genoa, 3 November 2017 - ERG S.p.A. and Total Marketing Services S.A. have today signed a binding agreement with the api Group for the sale of a 100% equity interest in TotalErg S.p.A., a company operating in oil product distribution and refining. The transaction perimeter includes approximately 2,600 retail service stations, the Rome logistic hub and 25.16% of the Trecate refinery.

Genoa, 10 January 2018 – ERG has today completed the closing with the api Group regarding the sale of its 51% shareholding in TotalErg S.p.A., a company operating in oil product distribution and refining, as well as the closing with Total Marketing Services S.A. for the sale of its stake (corresponding to 51%) in the company Total Italia S.r.l., owner of the business unit operating in the lubricant sector previously owned by TotalErg S.p.A... This transfer represents the positive conclusion of a complex transaction marking the ERG Group's definitive exit from the OIL industry, further strengthening its financial capacity with a view to continuing its growth path in renewables.

Edoardo Garrone, after presenting the new business plan in Vienna, made the definitive statement: "For sixty years we have been a family of oil men, but from this day forth we can no longer be called that."

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VIII. The Garrone Family Across Three Generations

The ERG transformation story is inseparable from the Garrone family's evolution across three generations. Each generation contributed distinct capabilities while maintaining remarkable strategic consistency.

First Generation: Edoardo Garrone (1938-1960s)

The founder established ERG's core identity: pragmatic, adaptable, and focused on long-term value creation. His willingness to partner with international majors like BP while maintaining control set a template that successors would replicate. He built the foundation during Italy's most tumultuous decades—war, fascism, reconstruction—demonstrating the resilience that family ownership can provide during extended crises.

Second Generation: Riccardo Garrone (1960s-2013)

He was the owner of Serie A association football club U.C. Sampdoria, and honorary chairman and CEO of Italian oil firm Erg. Garrone was born in Genoa, and joined his family's firm of ERG before going into the business of football club ownership.

Riccardo Garrone led ERG's expansion from regional refiner to national energy company. Under his stewardship, ERG acquired the service station networks, consolidated the Sicilian refining complex, and listed on the Italian Stock Exchange. His four-decade tenure as chairman provided continuity through multiple economic cycles.

Garrone, an oil magnate and father of six who would have turned 77 on Wednesday, bought Sampdoria in 2002 when the Blucerchiati were in Serie B and immediately oversaw the Genoa-based club's return to the top flight.

Fondazione Edoardo Garrone was established in 2004 by the will of Riccardo Garrone, as a natural evolution of the philanthropic commitment of the Garrone and Mondini families.

The Edoardo Garrone Foundation—named for the founder—represented the family's commitment to Genoese civic life beyond business. The foundation has focused on education, cultural preservation, and community development in Liguria and the Italian Apennines.

Riccardo's death in January 2013 came at a pivotal moment. The transformation strategy was well underway, but final execution fell to his sons.

Third Generation: Edoardo and Alessandro Garrone (2003-present)

Edoardo Garrone was born in Genoa on 30 December 1961. He is the father of five sons. Professional Activities • Chairman of the Board of Directors of Garmon S.p.A. (Holding of the Garrone-Mondini Group) • Chairman of the Board of Directors ERG S.p.A.

Earlier, he served as Deputy Chairman of ERG SpA from 1990 to 2003; manager from 1989 to 1991 in Strategic Planning Division after he joined the company in 1988. Prior to this, he worked at Marsud SpA from 1986 to 1987.

Edoardo joined ERG in 1988, initially working on group reorganization before serving as Deputy Chairman for thirteen years. When he succeeded his father as Chairman in 2003, he brought both operational experience and the strategic perspective developed during his tenure with Confindustria (the Italian industrial confederation).

In late 2002, Alessandro Garrone was appointed Chief Executive Officer of ERG.

Alessandro, born in 1963, served as CEO for a decade before transitioning to the executive deputy chairmanship. His tenure coincided with the critical 2008 Lukoil deal and the acceleration of renewable investments. The brothers worked in tandem—Edoardo focusing on governance and external relationships, Alessandro on operations and strategy.

Erg was the main sponsor of U.C. Sampdoria (until 2011), a football club that was owned by the Garrone family (Riccardo Garrone was the chairman, with Edoardo as the vice-chairman, and Vittorio as director), for more than 9 years.

The Garrone-Mondini family connection through San Quirico S.p.A. has provided the ownership stability that enabled multi-year strategic pivots. Unlike public companies subject to activist pressure or quarterly earnings myopia, ERG's family majority allowed decisions that sacrificed short-term earnings for long-term positioning.

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IX. Pure Play Renewables & Global Expansion (2018–Present)

The period following ERG's exit from oil has witnessed further refinement of its pure renewable strategy. In 2021, the Group embarked on a major asset rotation to complete its transformation to a pure "Wind & Solar" business model.

The "asset rotation" strategy meant divesting non-core renewable assets (hydropower and thermoelectric) while accelerating investment in wind and solar. This represents a second-order optimization—having already exited oil, ERG now sought to concentrate within renewables on the technologies offering the best risk-adjusted returns.

Genoa, 2 August 2021 - ERG has concluded today, through its subsidiary ERG Power Generation S.p.A., an agreement with Enel Produzione S.p.A for the sale of the entire share capital of ERG Hydro S.r.l. In terms of enterprise value, the consideration at of 31/12/2021 is €1.0bn.

In line with the above agreement, Enel Produzione paid a consideration of around 1,039 million euros, to which was added at closing an initial price adjustment of around 226 million euros concerning the mark-to-market valuation of certain hedging derivatives of ERG Power Generation relating to part of the energy to be produced in the future by ERG Hydro's plants.

The hydropower sale to Enel generated over €1.2 billion in total proceeds—capital that could be redeployed into wind and solar projects with superior growth profiles. Hydropower, while clean, required long-term concession management and faced increasing regulatory scrutiny in Italy. Wind and solar offered faster development timelines and more portable expertise across geographies.

Starting in 2021, Erg completed its transformation into an exclusively renewable operator, focusing on wind and solar power generation, with the divestment of its hydro and thermoelectric assets. Specifically, in August 2021 the company signed an agreement with Enel Produzione to sell the entire capital of Erg Hydro S.r.L., while in June 2023 it signed an agreement with Achernar Assets to sell Erg Power S.r.l., owner of the Priolo Gargallo natural gas-fired power plant.

Stans, October 18, 2023 – On October 17, 2023, Achernar Assets AG, through its wholly-owned subsidiary Achernar Energy S.p.A, completed the purchase of the entire share capital of ERG Power S.r.l from ERG Power Generation S.p.A (a company in the ERG Group). ERG Power S.r.l will be renamed B2G Sicily S.r.l. and will trade as "Brown 2 Green." It will continue to operate as the company that owns and manages the environmentally friendly, high-efficiency Combined Cycle Gas Turbine (CCGT) power plant powered by natural gas.

Italian energy group ERG SpA (BIT:ERG) has finalised the sale of the 480-MW Priolo Gargallo combined-cycle gas turbine (CCGT) cogeneration plant in Sicily, the last asset that stood on its way to becoming a wind and solar company only.

The IFM Investors Partnership

Milan, 16 June 2022 - San Quirico ("SQ") and IFM Investors (as manager of the IFM Net Zero Infrastructure Fund ("IFM NZIF")) (together, "IFM") are pleased to announce they will form a strategic, long-term partnership in respect of ERG S.p.A. ("ERG" or "The Company"). The family office of the Garrone-Mondini family and IFM NZIF signed a landmark agreement which will see IFM NZIF and its affiliates acquire an initial 35% interest in a new holding entity to be established and that will hold, in turn, c. 62.5% of ERG.

The investment by IFM NZIF and its affiliates is in excess of EUR 1 billion and includes an option for an additional EUR 500 million of capital to support ERG's growth along the lines of the strategic targets announced by the Company in March 2022.

IFM and its affiliates acquired an initial 35 percent stake in the new holding company, which in turn holds about 62.5 percent of Erg. This was the first direct investment in Italy for IFM.

In April 2024, as per the agreement, IFM increased its stake in SQ Renewables to 49%.

ERG is 63%-owned by SQ Renewables, a company in which IFM NZIF has a 49% stake.

The IFM partnership represented validation from one of the world's largest infrastructure investors. IFM Investors, owned by Australian pension funds and managing over €122 billion, saw ERG as a platform for deploying capital into European renewable energy. The partnership structure preserved Garrone family control while injecting growth capital and providing access to IFM's global network.

Edoardo Garrone, Chair of SQ and ERG, said "We are proud to announce a long-term partnership in ERG with IFM, one of the most reputable international fund managers, that embraces our ethical principles and strategic view to create sustainable value while fighting climate change. IFM will bring a wide international footprint that reaches far beyond Europe as well as its strong long-term financial support, to allow ERG to pursue faster, broader, and more diversified growth."

US Market Entry

In the same year, in December, Erg entered the renewables market in the United States through an agreement with Apex Clean Energy Holdings. This includes the acquisition of a wind plant and a solar plant for 317 MW of installed capacity and an estimated production of about 1 TWh.

ERG announces the signing of a relevant agreement with Apex Clean Energy Holdings LLC (Apex), a leading independent American clean energy company, aimed at establishing a strategic partnership with the mission of managing an already in operation wind and solar project portfolio and potentially expanding it. This agreement represents the first step of the Group in the overseas market involving the establishment of a US-based holding company that will include a wind farm and a solar plant, both recently started-up, for a total of 317 MW of installed capacity and an estimated production of around 1 TWh, besides a cooperation agreement in relation to new solar and onshore wind projects of about 1 GW under development in the United States. ERG will own a 75% stake of the holding and Apex the remaining 25%. Apex will continue the operational management of the assets.

ERG will spend $270 million to buy 75% of the holding company while Apex will own 25%.

The portfolio—the first in a series that will support Apex's capital recycling program—includes 224.4 MW Great Pathfinder Wind in Iowa and 92.4 MWDC Mulligan Solar in Illinois.

The US market entry represents a significant strategic expansion. While ERG had built its renewables business across nine European countries, the United States offered a different scale of opportunity. The Inflation Reduction Act's generous tax credits created compelling economics for renewable development. The partnership structure with Apex—a leading US developer—provided local expertise while limiting ERG's direct operational risk.

It entered the U.S. through a joint-venture - where it holds 75% of the shares - with Apex Clean Energy Holdings LLC, which has a wind farm as well as a solar power plant in its portfolio.

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X. Current Business Model & Competitive Positioning

ERG today operates as a pure-play renewable energy producer with a clearly defined geographic and technological footprint. The ERG Group is a leading independent operator of clean energy from renewable sources, operating in nine European countries and in the United States. As the foremost onshore wind operator in Italy and among the top ten in Europe, the Group is also active in solar energy production, ranking among the top ten operators in Italy, and in the battery storage sector. In just over a decade, ERG has significantly transformed its business portfolio, anticipating long-term energy scenarios and successfully transitioning from an oil operator to a pure "Wind & Solar" business model.

Installed Capacity Profile

In Italy, the company operates with a total installed capacity of more than 1,550 MW, including more than 1,400 MW in wind and 150 MW in solar. Internationally, it has a total installed capacity of more than 2,100 MW.

Specifically, in wind power, it is present in France, Germany, the United States, the United Kingdom, Poland, Romania, Sweden, and Bulgaria. As for solar power generation, the group operates in France, Spain, and the United States.

Business Plan & Strategy

With the update to its business strategy, ERG confirms and strengthens its "Value over volume" approach, based on selective and flexible growth that aims to seize the highest value business opportunities. The Group thus renews its commitment to the development of renewables and decarbonised storage technologies thanks to its vision and consolidated experience in this market. The goal is to reach an installed capacity of 4.2 GW by 2026, with growth ensured for more than 50% by projects that are already completed or under construction.

We expect a 20% decrease in total investments of approximately EUR 1.0 billion for the period 2024-2026, with an EBITDA of EUR 600 million by 2026.

"We strengthened the selective 'Value Over Volume' approach... by reducing investment for the next two-years and focusing our attention on assets that are currently under construction, organic developments, and repowering," said CEO Paolo Merli. The group reduced its capital expenditures over 2026 to 1 billion euro, a 20% reduction. It also reduced the growth of the asset portfolio to 4.2 gigawatts from 4.5 GW.

Leadership

Born in Milan on 24/06/1971, he graduated in Electrical Engineering from the University of Pavia in March 1996. From January 2014 to January 2017 he was Chairman of ERG Services S.p.A., a cross-services company of the ERG Group, later merged into ERG S.p.A. on 1 January 2017. He previously worked for around 7 years as a financial analyst covering the European Energy and Motorways sectors at Intermonte, a leading brokerage firm owned by the Monte dei Paschi Banking Group. At Intermonte he was also a "specialist" in ERG stock when ERG joined the STAR segment.

The shareholders then confirmed Edoardo Garrone as chairman of the company while the board, meeting after the meeting, chose Alessandro Garrone as vice chairman and director in charge of the internal control and risk management system. Giovanni Mondini was confirmed in the role of vice chairman while the CEO will be Paolo Luigi Merli.

Paolo Merli's background as a financial analyst covering ERG before joining the company provides unique perspective. He understands both the operational realities and the investor expectations that shape share price performance.

Financial Performance (2024)

In 2024, ERG S.p.A.'s revenue was 738.07 million, a decrease of -0.39% compared to the previous year's 740.94 million. Earnings were 187.09 million, an increase of 4.71%.

Last year, the group's adjusted core profit amounted to 535 million euro ($583.69m), which was within the guidance range of 520 million euro to 560 millions euros. The revenue was 738 million euro, which is similar to 2023's figure.

The company estimates a core profit between 540 and 600 million euro in 2025.

Emerging Technologies

Our technological diversification strategy continues, with an increased focus on battery storage (BESS) projects and hybridisation of wind and solar plants. This approach aims to enhance asset portfolio flexibility by integrating solar and wind power generation with systems capable of balancing production and improving efficiency.

As regards battery storage, our first 12.5 MW project under construction in Italy is located in Vicari, whose start-up is estimated in 2025. We also rely on a 200 MW pipeline between Italy, Spain, France and the United Kingdom.

The company highlighted strategic initiatives, including the commissioning of a new battery storage plant and the acquisition of a wind farm in Northern Ireland.

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XI. Competitive Landscape & Industry Position

ERG operates in a competitive landscape dominated by larger integrated utilities and increasingly aggressive pure-play renewable developers. Understanding this context is essential for evaluating ERG's positioning.

European Onshore Wind Market Structure

Within Europe, European suppliers continue to dominate in 2024 with a 92 per cent market share, which is four per cent higher than 2023. Goldwind continues to hold top spot globally.

Vestas, Nordex Group, Siemens Gamesa, Enercon and GE Vernova remain the top five turbine suppliers in Europe in 2024.

The distinction between turbine manufacturers and project operators is crucial. ERG is not a manufacturer—it purchases turbines from companies like Vestas, Siemens Gamesa, and Nordex. ERG's competitive advantage lies in project development, construction management, grid connection, and long-term asset operation.

Competitive Positioning Analysis

Applying Hamilton Helmer's 7 Powers framework:

1. Scale Economies: Moderate. ERG benefits from procurement leverage and operational efficiencies across its 3.7+ GW portfolio, but larger players like Enel, Iberdrola, and RWE have significantly greater scale.

2. Network Effects: Limited. Unlike platform businesses, renewable generation doesn't exhibit strong network effects.

3. Counter-Positioning: Historically significant. When ERG pivoted from oil to renewables in 2008, incumbent integrated oil companies dismissed renewable investments as dilutive to returns. This counter-positioning has eroded as majors now aggressively pursue energy transition strategies.

4. Switching Costs: Moderate. Long-term power purchase agreements (PPAs) and contracts for difference (CfDs) create revenue visibility, but individual assets can be sold to other operators.

5. Branding: Limited. Electricity is undifferentiated; branding matters primarily for talent acquisition and counterparty relationships.

6. Cornered Resource: Notable. ERG's geographic concentration in Italy and specific development expertise in certain European markets provides some privileged positions, though not insurmountable barriers.

7. Process Power: Developing. ERG has accumulated significant expertise in wind farm repowering—replacing obsolete turbines with modern, higher-capacity units. Since 2023, as part of its wind asset portfolio renewal project, the group completed the repowering of four wind farms in Sicily, doubling installed capacity and about tripling power generation.

Porter's Five Forces Analysis

• Rivalry: High. Numerous well-capitalized competitors pursue the same opportunities. The renewable energy market is booming and remains central to the energy transition process: in Europe and the United States, high growth is estimated for RES, with double-digit increases in the coming years. Nevertheless, the scenario remains challenging, with a constantly changing risk profile linked to a number of factors such as the still evolving regulatory framework, the volatile electricity prices, the cost of raw materials and investments in grid connections.

• Threat of New Entrants: Moderate-High. Low technical barriers, but access to grid connections and suitable sites creates bottlenecks.

• Supplier Power: Moderate. Turbine manufacturers have consolidated significantly, giving them pricing leverage.

• Buyer Power: Low-Moderate. Utilities and corporate PPA buyers have alternatives, but increasing renewable demand creates seller-friendly conditions.

• Substitutes: Moderate. Nuclear, natural gas with carbon capture, and green hydrogen represent potential substitutes for grid-scale renewable generation.

Key Competitors

Major European renewable operators include: - Enel Green Power (Italy, ~50 GW globally) - Iberdrola (Spain, ~22 GW wind globally) - RWE (Germany, major offshore and onshore wind operator) - EDP Renováveis (Portugal/Spain, ~14 GW globally) - Orsted (Denmark, offshore wind leader)

ERG differentiates through its pure-play model (unlike integrated utilities), family governance structure (enabling longer investment horizons), and concentration on onshore wind and solar (avoiding offshore wind's higher capital intensity).

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XII. Risk Factors & Regulatory Environment

Regulatory Risks

In a late-night statement, the company said that it had also reduced its guidance for 2026 from earlier estimates due to a more conservative approach towards the green energy policies of the Trump administration and the late approval in Italy of a new law governing the renewables sector.

US policy uncertainty represents a meaningful risk for ERG's nascent American operations. While the Inflation Reduction Act's tax credits remain law, future regulatory changes could affect project economics. ERG's response—adopting a "Value over Volume" approach with reduced investment commitments—reflects prudent capital discipline.

Italian regulatory developments also warrant attention. Feed-in tariffs that supported early renewable investments have expired or been reformed. Future revenue increasingly depends on competitive auctions, PPAs, and merchant exposure to wholesale electricity prices.

Price Volatility

The company estimates a core profit between 540 and 600 million euro in 2025. It cites volatility in market prices and volume.

Wholesale electricity prices experienced extreme volatility during 2022's European energy crisis, spiking to record levels before normalizing. ERG's hedging strategy—targeting 80-85% volume hedging by year-end—provides revenue visibility but limits upside participation in price spikes.

Weather Risk

Renewable generation is inherently weather-dependent. The performance of the quarter mainly reflects the full contribution of the new capacity, as well as better wind conditions. I'd just like to remind you that the third quarter in 2024 was very weak from this point of view.

Wind resources vary annually, creating EBITDA volatility independent of management execution. Geographic diversification across nine countries plus the US helps mitigate country-specific weather risks.

Legal and Regulatory Overhangs

No material legal proceedings are currently disclosed. However, renewable developers face ongoing permitting challenges, grid connection delays, and local opposition to new projects across European jurisdictions. These operational hurdles can delay project commissioning and increase development costs.

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XIII. Bull Case & Bear Case Analysis

Bull Case

1. Structural Tailwinds: European Union decarbonization mandates require massive renewable capacity additions through 2050. REPowerEU plans accelerated following Russia's invasion of Ukraine. ERG's positioning as a pure-play operator allows full participation in this secular trend.

2. Repowering Opportunity: ERG's aging Italian wind fleet offers significant repowering potential. Repowering is confirmed as one of the fundamental pillars of our growth and of our business plan. Through this activity of total technological renewal, we are improving the efficiency of wind farms by replacing obsolete turbines with new, more powerful high-performance turbines. Modern turbines generate 2-3x more energy from the same locations, enhancing returns on already-permitted sites.

3. IFM Partnership: The €1+ billion investment from IFM provides growth capital without diluting public shareholders. The option for additional €500 million supports continued expansion.

4. Dividend Stability: ERG announced that it would return to its shareholders 1.15 euros per share between November 2024 and January 2025, consisting of 0.15 euros per share and 1 euro as dividend. We have introduced a more rewarding remuneration policy for our shareholders, guaranteeing a minimum distribution of EUR 1 per share but with the flexibility to increase to EUR 1.3 if the results of the year allow it.

5. US Expansion Optionality: The Apex partnership provides access to approximately 1 GW of development pipeline, offering growth beyond European markets without requiring substantial initial capital commitment.

Bear Case

1. Scale Disadvantage: Integrated utilities like Enel, Iberdrola, and RWE can leverage balance sheet strength, global procurement, and diversified generation portfolios that ERG cannot match. These competitors are increasingly targeting the same European renewable markets.

2. Grid Connection Bottlenecks: Renewable development increasingly faces grid infrastructure limitations. Projects that cannot connect to transmission systems remain stranded. ERG's development pipeline depends on grid authorities that face their own capacity constraints.

3. Technology Risk: Emerging technologies—floating offshore wind, green hydrogen, advanced nuclear—could reshape competitive dynamics in ways that favor different capabilities than ERG has developed.

4. Italian Concentration: Despite geographic diversification, Italy remains ERG's largest market. In Italy, the company operates with a total installed capacity of more than 1,550 MW. Italian political and regulatory developments disproportionately affect ERG.

5. Valuation: The ERG SpA PE ratio based on its reported earnings over the past 12 months is 15.57. While not extreme, the valuation reflects growth expectations that must be delivered. Over the last year ERG has showed a −22.93% decrease. Stock price weakness reflects sector-wide multiple compression affecting renewable operators.

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XIV. Key Performance Indicators (KPIs) to Track

For investors monitoring ERG's ongoing performance, three metrics deserve particular attention:

1. Installed Capacity Growth (MW)

This is the most fundamental measure of ERG's business expansion. The goal is to reach an installed capacity of 4.2 GW by 2026. Progress toward this target—through greenfield development, repowering, and M&A—indicates management's ability to deploy capital productively. Track quarterly capacity additions against business plan commitments.

2. Capacity Factor / Load Factor (%)

This measures actual electricity production relative to theoretical maximum output. Capacity factors depend on wind/solar resources, equipment availability, and curtailment from grid operators. Improvement indicates better site selection, superior operations, or favorable weather. Decline suggests the opposite. Compare ERG's capacity factors to European industry averages to assess relative operational performance.

3. Average Realized Price (€/MWh)

The average price ERG receives for its electricity production reflects contract structures, hedging effectiveness, and merchant exposure. These two positives, I mean the full contribution of the new capacity and the better wind conditions, were partially offset by lower capture prices, also due to the progressive reduction of hedging pricing, which tends to follow the price scenario with a one- to two-year time lag. This metric reveals whether ERG is capturing value from energy production or suffering from adverse price movements.

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XV. Conclusion: Legacy and Lessons

ERG's transformation from an oil refiner to Europe's leading independent renewable energy producer offers lessons that extend far beyond the energy sector.

Lesson 1: Timing Is Everything—Especially in Exits

The Lukoil deal closed in late 2008, just before the global financial crisis devastated refining margins. Had ERG delayed by even a year, the proceeds would have been dramatically lower—if a deal could have been completed at all. Strategic exits require recognizing when an industry is nearing peak value, not waiting for obvious decline.

Lesson 2: Family Governance Enables Long-Term Thinking

Public company management typically operates on quarterly horizons constrained by analyst expectations and activist pressure. The Garrone family's controlling stake allowed ERG to execute a decade-long transformation that sacrificed near-term profits for strategic positioning. Not every family business uses this freedom wisely, but ERG demonstrates its potential.

Lesson 3: "Multi-Energy" Was a Transitional Strategy, Not a Destination

ERG's management resisted the temptation to remain forever diversified. The "multi-energy" positioning provided optionality during the early 2000s, but when the strategic direction became clear, ERG committed fully to renewables and divested everything else. Half-measures rarely succeed in commodity businesses facing structural decline.

Lesson 4: Partner, Don't Just Acquire

From BP in the 1950s to Lukoil in 2008 to IFM Investors today, ERG has consistently structured partnerships that preserve optionality while accessing external capital and capabilities. The Apex arrangement in the US follows this template—owning 75% while letting a local expert manage operations.

Giancarlo Bellina, Chairman of the Board and Chief Executive Officer of B2G Sicily commented: "First of all, I would like to thank the Garrone Family with great emotion and heartfelt recognition, for my exciting experiences of 35 years in the companies of the ERG group, to whom I owe a lot for my growth and the personal-professional successes achieved."

This comment from the departing manager of ERG's sold thermoelectric plant captures something essential about the Garrone approach. Even in divestiture, they maintained relationships and reputations that enabled future transactions.

Today's ERG faces new challenges: commodity price volatility, grid constraints, and competition from better-capitalized utilities. But the company has demonstrated adaptive capacity across three generations. The Garrones bet their family fortune on wind turbines a decade before most European industrial families acknowledged that the energy transition was real. That courage—or perhaps pragmatism dressed as courage—has positioned ERG for whatever the next decade brings.

The dice that Edoardo Garrone chose as his trademark in 1938 symbolized chance and playfulness. But the family's subsequent history suggests something more deliberate: a willingness to roll those dice on transformative bets while managing risk through partnerships and staged commitments. In an era when energy transition poses existential questions for traditional energy companies, ERG offers a case study in how to answer them.

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Myth vs. Reality

Consensus View	Reality
"ERG transformed because of environmental conviction"	The transformation was fundamentally driven by business pragmatism—European refining margins were collapsing while renewable returns were improving. ESG considerations reinforced but didn't cause the pivot.
"Family companies lack strategic flexibility"	ERG's family control enabled a decade-long transformation that public company management likely couldn't have executed due to quarterly earnings pressure.
"Pure-play renewable companies outperform integrated utilities"	Over the last year ERG has showed a −22.93% decrease. Pure-play status concentrates risk; diversified utilities have shown more resilience during renewable sector derating.
"The Lukoil deal was prescient timing"	While the timing proved fortunate, the deal structure—with put options for remaining stakes—demonstrated sophisticated financial engineering regardless of subsequent market developments.