Ladies and gentlemen, thank you for standing by, and welcome to Enel First Half twenty twenty one Results. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. I would now like To hand the conference over to your speaker today, Monica Giardi, Debt of Investor Relations. Please go ahead.
Thank you. Good evening, ladies and gentlemen, and welcome Welcome to our first half twenty twenty one results presentation, which will be hosted by our CEO, Francesco Starace and our CFO, Alberto de Paoli.
Thank you, Monica. Good evening, everybody. Let's start with the highlights of the period. We are at chart number 1 of the presentation pack. The operating dynamics of the quarter of the year showed a trend of significant recovery and the industrial pickup is now visible in the financials of the period.
As we detail later, the Q2 represented a turnaround across all industrial KPIs that are now accelerating and getting back to the levels of pre COVID-nineteen. Progressives were made also in simplifying the group with the completion of the merger of EGP assets into Enel Americas and the corporate organization in Colombia. In light of the predictable evolution of the business, We can therefore confirm our targets of the year including the guaranteed dividend per share of €0.38 per share for the 2021 year. On Slide number 2, we dive into some industrial KPIs of the second quarter. In renewables, We tripled the capacity built with 1100 megawatt installed only in the Q2 of the year, making a strong acceleration that supports our target of the year around 5,800 Megawatts.
Our networks volumes of electricity distributed are now back to pre COVID-nineteen levels, increasing 11% versus the Q2 of 2020, highly impacted by lockdown measures, especially in Latin America. In customers, the electricity sold to our customers in the free market is up remarkable almost 20% year on year. So industrial performance is back on track. The next slide shows the upward trend on investments that we are deploying. We invested BRL4.9 billion in the period, an increase of 20% versus the same period over the previous year.
In the ownership business model, almost half of the investments were devoted to networks with the remaining half allocated to the generation business, out of which around EUR 2,000,000,000 to renewables. From a geographical perspective, EUR 2,500,000,000 gross CapEx was deployed in Europe, EUR 1,400,000 in Latin America and the remaining portion mainly in North America with around EUR 700,000,000 We have invested around €300,000,000 through the stewardship business model focused primarily on Nelix and Renewables capacity managed through our joint ventures. Investment catalyzed and deployed by the third parties associated with the stewardship model amounted to around €1,000,000,000 Moving on to our global generation business on Slide 4, We can see that the total installed capacity is approaching the 90,000 mark fueled by the growth in renewable fleet, which now stands at 50,000 megawatts and accounting for 56% of the total capacity we Manage, the green repositioning of our generation portfolio is evident, and it is progressing at full speed with 3,600 renewable megawatts additions and 1,000 megawatts of conventional generation capacity closed in the last 12 months. The generation output increased overall by 8% year on year. It reached more than 110 terawatt hour recovering from the contraction that was observed in 2020 as the consequence of a COVID-nineteen.
The total electricity produced is almost back to 2019 levels, But with significant changes in the output mix. In fact, if we consider pre pandemic levels, The reduction of thermal production is notable as well as the significant increase in renewable contribution up to 15% by 2019. It's worth to highlight that coal production was down a further 5% year on year after the steep decrease of around 60 terawatt hours last year And that the increase in thermal production is mainly driven by gas and by the low levels of hydro resources in Latin America, namely in Chile. Thanks to the continued effort on decarbonization emissions, emission free production is up 9 percentage points first 2019 reaching 65%, that positions us well on track to reach our decarbonization targets. If we focus on the progress made on renewable growth, we go to Slide number 5 on Enel Green Power, where we see that Total renewable capacity stands now at around 5,000 megawatts, approaching 60% of our total installed base, Roughly, renewable capacity built over the last 12 months is equal to 3,600 Megawatts despite Challenging conditions imposed by COVID-nineteen.
Year to date, we built 1300 megawatts, almost doubling the amount of megawatts deployed in the same period of previous We will scale up the magnitude of new renewable capacity additions. We expect to commission over the next two quarters about 4.5 1,000 Megawatts. As of today, 100% of these projects are in different degrees of execution phases, Offering high visibility on their deployment by year end. Our global footprint and development capabilities allowed us to Which is also backing growing and backing up future growth projects. We see that in chart in the following chart.
As of today, this is chart number 6, pipeline has surpassed 300,000 megawatts broadening project optionality, securing flexibility of capital allocation and More than everything, protection on returns. Mature pipeline is now worth 73,000 Megawatts, out of which 23,000 megawatts are earmarked for the period 2021, 2023 and 46,000 are already covering projects for the 2024, 2025 period. Over the last 12 months, our mature pipeline grew by almost 30,000 megawatts and almost 6,000 megawatts entered the execution phase. The mature and early stage pipeline dynamic positions us optimally for both the planned period as well as for the years to come, offering an advantage into the new decade of 2,030 and supporting our growth ambition. With respect To the 19,500 Megawatts targeted additions for year 2021, 2023, today we stand at around 70% of this Target addressed with around 1300 megawatt already built as of now In around 12,000 currently in execution, the residual target is covered therefore 3.6x By the related portion of mature pipeline, which translates in negligible delivery risk, high confidence Of achieving even more than this by end of the period.
We can leverage on this extensive and well diversified pipeline also to further push The implementation of the stewardship model in renewables, thanks to our origination capabilities, crystallizing over time the value that sits in this large portfolio. Let's move now to the operating achievement on Global Infrastructure and Networks and we are on chart number 7. In the 1st 6 months of 2021, volumes in electricity distributed stood at 246 terawatt hours, up 6% year on year showing a progressive recovery from the dynamics that were observed in 2020 affected by lockdown measures. Looking more closely at the evolution across the 2 quarters of the year, the first quarter recorded a mere 2% increase. The Q2 is up by 11% versus the same period of last year, which is a clear evidence of the acceleration of the recovery.
This acceleration has been observed across all geographies, which now stand at level of distributed energy Almost in line with the pre COVID 2019 level. In Europe, volumes increased 11 terawatt hour versus last year. In Latin America, the uplift is driven by Brazil, where we distributed 2.4 terawatt hour more than the same period of 2020. And thanks to our continued commitment in fostering the quality and resilience of our networks, SAIDI improved by 6% and stands now at 2:50 minutes. The rollout of the 2nd generation smart meter progressed further With another number of smart meter installed that reached 21,000,000, up more than 40% versus the previous year.
Let's look now at customers on Slide number 8. Our position on free customers strengthened In the last 12 months, both via our retail operation as well as our services and platforms offered by Enel X. More than 1,000,000 new customers have been added to the free market, mainly Romania due to the regulated the end of the regulated tariffs and Italy added 300,000 customers. Energy sold in the free market is up 10% with volumes increasing in both B2B and B2C segments driven by economic recovery. Looking at Enel X, This business line performed extremely well with double digit increase recorded on all product lines.
More than 100 1,000 charging points have been added to our electricity network for electricity vehicles, reaching more than 200,000 figure, up 2.2x versus last year. Lighting points increased 2,900,000, up 21%. Battery storage increased by 27 Megawatts. More than 7,000 Megawatts of Demand Response capacity was offered globally. In fiber, We reached 12,100,000 households passed, up 39% year on year.
The industrial development goes together with the progress on group simplification. We are now at chart number 9. And we see here that The completion of the merger and the public tender offer, we now own 82.3% of Enel Americas. This has aligned our corporate structure with the Enel subsidiaries of the group. This integration of the integration of renewables will unlock synergies, We'll reduce operational and financial risks for Enel Americas, resulting into an earning accretion of the group, which we estimate to the tune of 13%.
Our aim of reaching a streamlined and more efficient structure continues as testified by the agreement reached in Colombia with the creation of Single corporate vehicle that will support growth in the country. Let's now open up the section of financial results. I hand over to Alberto for that part. Alberto, the floor is yours.
Thank you, Francisco. Good evening to everybody. I'm knocking you off on an analysis of financial results and I'm starting on Page 11. EBITDA To the EUR8.4 billion in line with the expectation for the semester, with the 2nd quarter That shows clear signs of recovery compared to the last year. Group net ordinary income came in at €2,300,000,000 decreasing by 4% versus previous year.
I will detail later some nonrecurring items into the net income that are weighing On the performance, for now, let me just highlight that excluding the negative impact of liability management and operating and Fiscal nonrecurring items, net income would have been up by 10%. FFO reached €2,700,000,000 up 31% versus the first half of twenty twenty and broadly in line with the seasonality of cash flow dynamics that we always experience. Now moving to an analysis of the period, I will pick up with the evolution of EBITDA On Page 12, you can see from the chart and as Reade commented during the Q1 presentation, In the 1st 3 months of the year, the economic results have been negatively impacted by the lack of Some one off items booked in 2020 and for comfortable business dynamics. The Q2 of 20 'twenty one was driven by the recovery of the operating performance across all the business lines It marks a clear turning point supporting our targets for the year. Since April, devaluation of Cadences and not recurring items have smoothened the negative impact, while the industrial growth has become visible, contributing around 100,000,000 in the period.
We observed the recovery of the operating performance across all the business segments With LION shares associated with global power generation, where amongst other effects of the level of electricity distributed in LatAm, particularly in Brazil, as Francisco mentioned Previously, we expect these dynamics to last in the coming months. And now moving Into a divisional deeper analysis, we are on Slide 13 on Global Power Generation. The ordinary EBITDA stood at around €3,200,000,000 Down around €200,000,000 year on year or 6%. Results have been supported By the positive contribution of renewable new installed capacity for around €250,000,000 That has been offset by some negative items detailed as follows. We had lower hedging prices, Mainly in Italy and Iberia for around €150,000,000 We got around €60,000,000 of negative impact due to the weak hydrology in Chile, €90,000,000 negative From currencies devaluation, trading activities contributed negatively for around €20,000,000 is almost Flat and also almost 0.
And this is a consequence of the normalization of gas portfolio management and the short position in Being counterbalanced by a temporary positive effect on portfolio optimization in Italy. Worth to highlight that First, the negative price effect would be completely reverted next year. As of today, we have already hedged More than 90% of the 2022 production at prices that are on average €5 more, But mainly in Italy, Spain, so we are talking about an increase of in the range of 7% to 10%. 2nd, Negative impact from the weak hydro production in Chile can be considered a black swan, So an exceptional situation in 2021. And lastly, we don't see further devaluation of currencies Affecting numbers on future year on year comparisons as we see the erosion effect being close to an Considering all these and the push from the last 12 months and future quarters developments, we see the growth trajectory Hope in particular the renewable part of the global power generation to come back supporting strongly supporting Future trends and targets.
Let's now take a look on the infrastructure network on Page 14. Here EBITDA stood at €3,500,000,000 down 9% versus last year. The dynamics of the quarter can be summarized as follows: With the higher electricity distributed across all the Latin American countries, with Brazil contributing for more than half of this amount. Then we got €70,000,000 positive related to tariff indexation coming from mainly coming from Brazil €75,000,000,000 coming from efficiencies. These positive items were offset by €120,000,000 negative impact associated with ALF regulatory adjustments and ALF on so the Effect of CPI on OpEx, then it has been offset by the tariff indexation.
€340,000,000 is the negative impact of nonrecurring items that we accounted in 2020. So Net of this distribution would have growth also in the period and then negative Impact from currency devaluation in LATAM from 110. So all in all, if we get The €340,000,000 €110,000,000 of FX impact, we sum up €450,000,000 And so Without this, we would have a growth in the distribution network because of the positive items I have commented before. From a geographical standpoint, in LatAm, Excluding the impact of FX, EBITDA increased by 6% versus the same period of last year, benefiting a set of tariff indexation and decreasing volumes. Net of non recurring items, the performance in Europe is almost flat year on year.
Now we move on, on retail, Page 15. As you can see from the chart, EBITDA Came in at €1,600,000,000 with a recovery from the extreme conditions experienced in 2020 associated with the COVID-nineteen pandemic. Group expanded its pre market customers by adding 1,000,000 of new clients Over the last 12 months, on the back of the end of the regulatory in Romania and the increase in the customer base in Italy. Looking closely at EBITDA, free market EBITDA is up by 12% year on year, Thanks to a better performance in Italy, mainly attributable to a 10% increase in volumes, which are now back to pre COVID levels. In Italy, EBITDA increased 19% or around €1 €70,000,000 in the year, so it has been driven by a pickup of volumes in both B2C and B2B And also a better marginality, unitary margins up 7% on average.
In Iberia, Net of non recurring items, EBITDA declined by 12%. This is driven by an increase in B2B segment Due to higher unitary consumption associated with the economic recovery post pandemic and a reduction in unitary margins for the B2B segment Partially compensated by higher marginality for business customers. So in Romania, retail EBITDA increased by Around the €50,000,000 or 50% by the end of the regulated tariff. Regulated market, EBITDA is down around €90,000,000 on the back of the elimination of the regulatory tariff in Romania and the decrease of the regulated customer base. OpEx per customer proved flat year on year.
And worth to highlight that Enel X EBITDA increased 4 times versus 20.20 reaching more than €100,000,000 driven by energy efficiency programs and customer needs of energy flexibility services. Now in the next slide, we will show in detail the earnings evolution during the period. I am on Page 16. Here you can see that ordinary group net income came in at €2,300,000,000 Down 4% year on year. This performance is affected by some nonrecurring items, net of which The growth in the first half would have stood at 10%, as said.
We commented already the moving parts The level, therefore, let me now move on the other lines of the profit and loss. D and A are lower than last year As a consequence of currencies devaluation, lower bad debt accruals for more than €200,000,000 And lower depreciation, thanks to the impairment made in 2020 on coal assets in Chile, which more than offset The impact of the investments deployed. The evolution of financial charges was significantly Backed by the liability management transaction on the euro denominated securities performed in June, which is worth To remind, it is part of the liability management program. We expect to compete by Enel. We have already completed in July, but so it's not accounting in the June results.
I want to highlight that the debt refinancing strategy carried out during the last 12 months reduced by 20 basis The cost of debt leveraging on cheaper sustainable instruments and hybrids. Then Equity investments contributed for around €70,000,000 Taxes increased by €95,000,000 driven by the adjustment of the deferred taxes in Argentina following the recent increase in the nominal tax rate Enel Americas and Enel Chile states and the higher contribution of Moving now to the cash flow on Slide number 17. FFO The negative working capital is expected to be fully reabsorbed by the end of the year. Dynamics underlying the FFO evolution can be summarized as follow: higher EBITDA after provisions, Mainly associated with lower bad debt accruals, net working capital at minus EUR 2,700,000,000 Improving versus last year, mainly thanks to the reabsorption of the residual COVID-nineteen effect recorded in 2020, it's worth highlight The working capital dynamics are in line with historical seasonality and include temporary items to be reabsorbed in the second part of the year, higher taxes Paid mainly due to the advanced settlement tax payment at the end of the last year, higher financial charges paid related to the liability management program executed in June.
By year end, we expect Our cash generation to fully cover investments. Now let's take a look on net debt On slide number 18, in which you can see that net debt is equal to €50,400,000,000 at the end of the semester. The main changes versus the end year or the past year are driven by The negative already commented 2.2 percent free cash flow, dividend paid for 2,400,000,000 euros €1,400,000,000 associated with active portfolio management activities, mainly related to the Enel Americas PTO, Hybrid bonds accounted as equity, a negative impact from FX of around €1,000,000,000 Gross debt Stands at EUR 62,100,000,000 increasing 5% versus December 2020 in light of the already mentioned dynamics on the net debt. And before the closing remarks, let's take a look on our sustainable finance strategy. As already mentioned, I am now on Page 19.
As already mentioned, during the Q2 of 2021, we implemented some liability Management actions with the aim to further accelerate our sustainable finance path, while optimizing the financial structure of the group and further Reducing the cost of gross debt. As a consequence, the share of sustainable finance sources on total gross debt Are expected to reach 46% at the end of 2021, 13 Percentage points higher than full year 2020, and we are now 2 years in advance to reach our target of 48% in 2023. Thanks to these two transactions, we refinanced Eden Advanced conventional expensive bonds with cheaper The value of the carbon blow rate environment. And finally, we remind you that this refinancing program has affected the Financial expenses were around €200,000,000 in the first half, while the impact for here and following the completion of the whole program is expected To be in the range of €500,000,000 And now I hand over to Francesco for some closing remark. Francesco, the floor is yours.
Thank you, Alberto. As you have appreciated, the 2nd quarter is showing a solid and visible recovery in the operating performance, With most of the dynamics expected to continue with a similar trajectory also in the 2nd part of the year, This will support the delivery of our targets for the full year 2021. The simplification in Latin America has reached The fundamental milestone, the increased stake in Enel Americas and the reorganization in Colombia are contributing to earnings accretion And the next steps in the region will unlock further value. The growth trajectory of our renewable fleet is confirmed, And it is progressing at full speed. Indeed, the remaining capacity to get to year end target addition of around 5.8 gigawatts is fully secured.
Future years are abundantly covered by the growing pipeline, which is helping also in stabilizing the returns. Finally, it's worth remind that in 2021, we already set a fixed remuneration for our shareholders with a dividend per share of 0.38 €0. Per share. So the compounded growth of dividend per share and earnings per share will result in a total return to shareholders of More Than 10%. Thank you for your attention, and let's now open the Q and A session, and Monica will manage this.
Thank Thank you, Francesco. Thank you, Alberto. Before entering into the Q and A, let me thank all of the analysts that sent questions over. We We have unfortunately, a hard stop at a quarter past 7. So whatever is not answered, we will answer by e mail after the call.
I do apologize for that. So let me just crack on with the question. The first one is for the CFO. If he can provide guidance on 2021, looking at EBITDA, net income and net debt and how this compares with the plan.
Okay. So first of all, let me confirm that the targets we Gave to the market. So the targets are all fully confirmed. I have already the chance To comment some important moving parts. And I remember you that when we gave the target in the Capital Market Today, we assumed a range in the EBITDA between EUR 18,700,000,000 and EUR 19,300,000,000.
And in this Target, we were including around €1,400,000,000 contribution from the disposal of OpenFiber. And we assumed €1,000,000,000 associated with the managerial action to optimize commodity portfolio of the group, mainly referring Now today, so we see no room to go ahead with the latter and Open The Fibrain and the increase of the potential of Fibrain to 1.7 will be used to compensate €1,000,000,000 of currencies devaluation that is day to day is the mark to market of the new FX versus our assumption in November.
Net of all
these moving In November. Net of all these moving parts, the operating deployment of the group remain unchanged. And so this is so the guiding style of our development, so the operating Ultras are unchanged versus the assumption we had. On the net income, Well, bottom line ranging 5.4, 5.6, we're assuming a significant liability management in the range €600,000,000 And so that is more or less what we are. So now accounting that We are just closing the program in more or less at the level.
We assumed an increase of €300,000,000 In the increase of OpenFiber, now it's going to offset the impact in net income of the FX impact. On debt, so we project To stand at 2.7 times net debt to EBITDA guidance in line with the plan.
Okay. We stay on the guidance. Alberto, still with you. What do you expect to happen in the 2nd part of the year that will bridge you to the full year guidance?
Well, after this Q2, I think that we have a clear visibility of what is going to happen in the second half. Yes. So we don't know if another pandemic wave is coming or not. But looking at the normalization of the situation Like we saw in the Q2, we think that now we will be driven by this trend. So summarizing this, we see in the 2nd quarter, so no impact coming from the So softening of the impact of FX.
And so we are not assuming now a better I think activities will perform very well. So we see a further increase in the demand of energy. We see a delivery, a strong delivery of renewables in the second quarter in the second half. And on the other side, we see some On the high level of prices, we are it's true that we are almost fully hedged, but we have some part of The production is still unhedged because we keep some part not hedged. So we may have some improvement on the side And also Enelix doing so.
We think that as of the operational results that We saw in the Q2 will last and will drive the company towards the target that we have already reaffirmed.
Okay. Still with you, Alberto, really popular question. Can you please provide an indication of guidance 2021 separating earnings From ownership model versus earnings from stewardship model and one off that should partially offset gains from disposals.
Well, I think I have already answered the question saying that So the operating results that we had and we have in our target are unchanged that the moving parts are related other part of the results related to capital gain and so liability program I want to stress the fact that while this year is so this question is still so Compatible with the fact that we are starting the stewardship model with a big Capital gain that will come from OpenFiber disposal. After this, So the business is will be composed in the target of the next 3 years that now is €3,300,000,000 would be composed by several parts, not only capital gain and that the capital Again, are fully within the operating model and business model that we are so pointing at. So these are So the way in which we want to look at the business, so separating from one to other is in the future will be more and more difficult. Having said that, I say that looking at the net income, we point to a net income That is in the range of pre OpenFiber at roughly €5,000,000,000 Then so the OpenFiber capital gain that will come On top of this €5,000,000,000 would be partially offset by on one side the effect of FX That is roughly €300,000,000 at the net income level.
And second, so the liability management Impact that is in the range of €500,000,000 All in all, these three parts together will drive final results that will stay in the range Of RUB 5,800,000,000.
Okay. Next, Another popular question. Is the mark to market on currencies still pointing to EUR 1,000,000,000 shortfall versus the EBITDA that you had in the plan?
Well, so we have cheese to run Today, it would be a little bit different, so it would be a little bit less negative. But we do prefer to stay stick on an impact of €1,000,000,000 to drive on the results of 20 'twenty one and to stay at the end of the year looking if some sort of better news on FX Sai, will come and will soften and will power our final results.
Okay. Still linked somehow with the facts. Alberto, where do you see EBITDA 2021 for your LatAm activities?
Well, so net of FX effect, as I said, LATAM are substantially in line with the plan. This is so coming from netting of different results and different Performance in different countries, Chile has been impacted negatively this year from so several reasons That can be grouped in the black swan I said, but so it is going to be offset by better results in other countries.
Okay. I think there was a question around Chile, but I think here and there you answer that question So I would move to guidance on 2022. EBITDA net income net debt, how this compares with the plan?
Well, so we have already said it. So we don't change our view, particularly after this Good operating results. So the mark to market of our plan on the new FX It will be impacting the 2020 results of about But looking at several parts that we are working on in terms of better price shape and also better hedging strategy we have already completed on one side. On the other side, an increase Investment potential, increasing investments that we may do, pushing on our pipeline on one side and also In increasing investment in distribution, on the other side by the big push that will come from the next generation new funds That are so due to be deployed in the next month. We can confirm the target we gave, Notwithstanding the EUR 1,000,000,000 impact of FX.
So we are ready to fully recover This gap and to confirm the target.
Okay. A few analysts were asking about the liability management program and the cost Associated with, I think, that again here and there, you answered that question too. We move to the CEO for a set A question around M and A and simplification of the structure. The first one, Francesco, is Now in recent press speculation, Financial Times suggests Iberdrola is considering spinning off its renewable business following a similar move by Acciona. Do you still think the benefit of vertical integration outweigh the negatives?
Yes. We think that Nickel integrated utility model is still a safe option. Actually, it's even more the case now that we are getting into the more turbulent Phase of the energy transition. In fact, I think the announcements that we see here go in the direction of confirming this. I don't think that We are going to see these companies break up as others have done in the past because the model has proven to be The integrated model so far has proven to be a winning model in the energy transition.
I believe that spinning off renewable business Or even portion of it like the offshore renewable business might make sense in those companies where There is perhaps the need to lever I mean, store up the balance sheet or increase the exposure to this sector Because it seems not probably been understood by the market. I this is not the case of ACCIONA and Iberdrola, for example. So I can't comment on the logic that they apply here. Believe me, I think that the overall integrated market player will with stand the shocks and will benefit from the integrated business model much more in the energy transition and other players. And we think that the market is going to appreciate this as it is starting to do already during The last 2 years, if you look at the relative valuations of integrated and non integrated players, you see the change in the dynamics.
Okay. Staying in our home, looking at Enel Americas, what are your plans on Enel Americas
We have some plans. And of course, the first to be Most of these plans will be our core shareholders in Latin America. Now that we have the possibility, we will streamline to the Then possible the corporate structure and we will restart our growth trajectory now that we have a very Well balanced and integrated portfolio options to grow, both in renewables and Greece. We will identify together with them the geographies Where we think growth is more likely to happen with valuable contributions and those portion of Latin America where growth perhaps is not as Promising and value is maybe a little bit behind in the curve. So this is something that we intend to do with our core shareholders in the next months.
Okay. Silo, on Americas, Francesco. I know you start asking what are our plans in Brazil if we are considering any
I think I've always maintained that if we are a significant player In this space, in the utility space, in any country that has a liquid and working stock exchange, Then we should have a listed entity in that country. This is the case of Andesa in Spain. This is the case of Enel Chile in Chile. And I think Now that we have reached a certain dimension in Brazil and this dimension keeps growing with additional renewable capacity, maybe it would be a good idea to do that Also in Brazil, but clearly, this must be discussed with our core shareholders in Enel Americas. And I think it's something that we need to discuss with them.
Okay. We look at one of the slides we presented about the Colombian restructuring. So analysts are asking what this reorganization means strategically?
I'd say that the agreement that we have reached with our Panco shareholders in Colombia has created a single corporate vehicle that can now feed growth in the country at 3 60 degrees, So no limitations. It offers a benefit of a more efficient and streamlined organization. It focuses all the companies Regardless of what is the business line they have on pursuing growth with value creation, So it is exactly what we would like to keep doing in all countries in Latin America and in general. So it is, I think, a very, very effective step. And we see benefits coming also from, let's say, A more constructive climate between investors, which are setting aside all the past claims And our focus now on value creation and growth in this big country.
So it's a big step.
Okay. It's a set of 3 questions Around M and A, many times you mentioned, Francesca, potential acquisition in the U. S. Can you update about the process of scouting?
The U. S. Is a large space and the scouting is ongoing and we know that there is value creation in this Wendell, I agree with some of the comments that were given to us in the past and perhaps some that we just might have Received in the recent days, clearly, we need to find the right assets and we need to find an agreement with the owners of these Assets and this is something that will probably come up, but it hasn't come up to our To be honest, we were also focused on the restructuring in Latin America and that got a lot of attention and work. And now it's done. So we can now devote ourselves to this.
Okay. Another M and A question Around press reports of about ERK disposals in Italy. Can you Any information around the acquisition of Ergaset in Italy?
Not really. We cannot comment on the sale of the asset With Ergas, we don't comment on processes that are ongoing, in particular, this kind of news. What we can say is we are always associated to any transaction that happens in Italy, whether we are pursuing it or not. But this is something that I think will be clear in the next weeks. So bear with us a little bit more.
We cannot put up comments at this point.
Okay. Another recurring question about the elephant in the room, as Alberto quoted. When do you expect Closing for the OpenFiber deal, any change to the capital gain in case of delay?
I don't think there is a The delay is not envisageable at this point. We are working to get the signing in the next In a few days, I think this is something that might happen for sure within the end of the year. So we don't see this Likely that the transaction will be dragged on further. Okay.
We move to more Business related question. I'm staying with you, Francesca. Are you concerned about the impact of the fast rise in power prices On the competitiveness of the European Industrial Sector.
I think there is A little bit a tendency to overreact to market dynamics when they are in the rise and not when they are on the down, which is normal by the consumers, in particular by the industry. I think that these spikes might be slightly Overblown in their overall impact. We are not concerned. I think there are, however, several tools available And one of them, which the industry in Europe has largely overlooked over the past, I would say, Almost 20 years is contracting energy in the long term. This is a very peculiar system, the one that we have in Europe and compared to the rest of the world.
And the industry is not used to capture the benefit of having a long term stable supply of energy at a discount rather than ride the roller coaster of pricing going up and down year by year. Maybe this is the time that we all agree that we should restart a long term pricing Habit and customer in Europe, too, and I think that would provide great edge and would
Okay. Spanish government the Spanish government is proposing a clawback of the benefits of CO2 prices for legacy fixed cost Where are we in the approval process? And what is the likely impact? Would that be compensated by the elimination of the generation tax?
First of all, we think that this measure, like all measures that tamper with market prices, It's going to backfire. It's not going to be the solution. If we want if there is a solution that needs to be found, it's not this way. There is no windfall profits for hydro nuclear plants that are already taxed and further tax could jeopardize the targets that are stated in the National Climate So I really believe this is not the right approach. There is, however, an ongoing process, which is at country level, but there is also European side of it because clearly playing with ATS mechanism Has an impact on the credibility of this mechanism across Europe.
So we think that the Final version of the draft build proposal will incorporate substantial improvements. The government has is pursuing a fast track implementation. So we believe that somehow this will end up in a resolution before the end of the year. We think this is likely possible, but we believe that Europe will have a say and that there will be a lot Two modifications before we see the end of the story.
But I'm just adding one small bit. Analysts are asking if we can assess the financial impact.
There are 2 moving parts to have, so a clear view on what the final impact It might be. Only to stress the fact that with a couple of changes Before the beginning, the first proposal, we have already halved the potential impact versus the previous one. And we think we are not ready at the floor of this discussion that may result In some low that will be at the end, we'd have very not meaningful impact if only so some of Our suggestions, our and the other utilities in Spain are suggesting to create a sheet So further increase in price is not impacting a certain level the situation and the economical impact. On the other side, I would say we now are not accounting big impact for 2022. I may say that so With the situation of hedging already done and hedging is also part that we have to discuss and to understand Wedge prices will fall in the low or not.
But we I can say that we for now, we see limited impact coming from This level for 2022.
Okay. Next, I go back to Francesco. Do you think there is a risk That a similar initiative can be implemented in Italy. I think you're on mute.
We hope not. We don't think so. We've seen the Italian government Choosing a different pattern, at least on the short term, using the ETS generated extra money To compensate for the additional cost of some of the additional cost of the customers, we think it would be The wrong answer in Italy too. We have not seen signs from the government in that direction. It would probably also be incompatible with the legal framework And the regulated tariff system that we have here in Italy, even more now that the release of the FIFT for 55 targets indicates clearly that Yes, it's going to be the way to go, not only for generation, but for power, but also for other segments that today are not part of it.
So We don't expect this contagion to spread to Italy. And by the way, I think it in theory, if it would go across Europe, it would Finally killed the idea in itself because Europe would then have to basically reject it overall. So I think it's not going to happen.
Okay. Renewables delivery, CEO, following a lower than expected Q1 delivery of new renewable capacity, Q2 started to show some growth. Can you meet the 5.8 gigawatt target for 2021?
I think, yes, we will meet the targets with a very strong 3rd and 4th quarter. I recall everyone that we are recovering 800 megawatts that were delayed from the 2020 years already. So there is It's a very heavy year, this one, in terms of installations. We are also building And of additional megawatts that we could draw back from 23 in case we would see problems in some of the projects. But Overall, I think we are going to reach more or less this target and we might be up or down a few maybe 100 megawatts, 200 megawatts, But that's a ballpark and it's a big step.
Okay. Other side of GPG, you have a target to shut down 2 9 gigawatt of coal this year, is this confirmed? Any upside potential?
Yes, it's confirmed. The large part It's coming from Spain because we have received the green light from Redeletrica and CNMC To close down the 2 big plants, Littoral and As Pontes, this alone covers 2,600 of these 2,900 megawatts. The 1300 that are missing should be coming out of Italy, out of the Fusina power plant, which we expect To be given green light by the end of the year. So the answer is yes. Let me underline that the fact that we Shutdown, that means we get formal green light from the network operator and the regulator to do that, Does not change much the production profile.
I mean, these units were already not producing because of economic displacement given the price of CO2 that we are observing. So there is no impact on the production of terawatt hours and on the CO2 emissions. It's just a question of removing the megawatts from our megawatt theoretical base. But these megawatts are By all practical reasons, already a muted theme in terms of production.
Okay. Question for the CFO. Prices had a negative impact on results. Can you
Well, yes. So on the lower hedging prices, So, the impacted results in 2021 were around EUR 140,000,000 mainly in Italy and Spain. This negative effect It's already fully reverted because we in 2022 today, we have so the Latin America Hedge of 80 100 percent for 2022, have an average price that is in line with the 2021. So no No changes and no reduction in this price. While when it comes to Italy and Spain, so we are So ranging around, say, 75%, 80%, 90% of hedging ratio With prices that are in the range of 5% higher in Spain and more than 15% higher in Italy.
So this is the outlook for 2022.
Okay. Francesco, for you, we stay in Italy And analysts is asking Enel recently signed a new PPA in Italy. Other operators have signed have been signing PPA contracts in the past months. This is the actual start of a developed PPA market in the country?
I think it is the beginning of it, yes. And again, it's a welcome moment because as I said before, it's time that the European industry Uses this tool. It's a very useful tool to have clarity on energy prices and stabilize the cost Structure of the industry and on the long term benefiting from the stability of a lower price that the PPA offers. So I think it's the beginning. As I said, the European industry is a very dense and extremely large Platform of operators, it will take time for everyone to be comfortable with PPAs.
But I think it's beginning to show that this logical tool starts to make Its way into the Italian system and therefore, it will mitigate the short term hikes of spikes of gas And commodity prices on the short term.
Okay. Alberto, for you, analysts are If you can provide an update on the availability of hydro resources.
Well, this year and also The last years, all in all, we see a neutral impact Different situation of hydrolycity in our countries. This year, We got some severe impacts in Chile and also in Spain. But on the other side, we had better radiological resources in Italy, in Colombia, In Panama and Peru, so at the end, we had a neutral impact on hydro. That is more or less What we are seeking for the net effect that spreading our global print in all the technologies may offer To have at the end a neutral impact between offsetting different situation in different countries.
Okay. Francesco, we go back to you. Analysts are asking if you can share preliminary Thoughts around the first consultation document released by the Italian authority a couple of weeks ago. If you can Tate, the range of allowed return and what do you think the impact might be?
First of all, this is the beginning of a negotiation. It's a very technical, Quite complex document. It is a first step of a process. You may have noticed that there are no figures Thrown at people. So it's and that is positive because it leaves a lot of flexibility to the negotiation.
I think there are different ranges of potential outcome given that there are many moving parts at play. We are going to submit our responses To the regulator with whom we have an ongoing dialogue as all the other players, the second consultation document is due in October. I think it is likely to be a reduction of the allowed return, but the extent of the cut Will only be possible to be certain as some of the key variables would be known. Let me tell you that my Hans, my feeling is that this time that the regulator is conscious that Although there is mathematically, if you want from a pure mathematical WACC standpoint, the ground for some reduction To the allowed return, on the other side, there is a need to convince the industry to add And not subtract investment given the opportunity that the PNRR is giving. So they have to manage These 2 different forces and try to find the right balance.
So far, we have seen that it is Extremely balanced and the discussion is quite encouraging. So I'm positive that this will end Better than the worst ideas that we've seen on some of the hot reactions coming out.
Okay. Francesco, we stay with you for a more general question around the Fit for 55 package, what's your view on that?
I think it's a great document. I think the European Commission has Put down the last missing piece of the puzzle that is, first of all, the strategy of the Green Deal, Then the amount of money thrown at the Green Deal and now the Fit for 55, what governance and what changes to the governance of the energy sector and industrial sectors in Europe need to be implemented in order for this Really, there's 2 parts to play and come into effectiveness. We are in favor of higher targets such as the We are in favor of specific target for energy efficiency. We are in favor of extending the ATS 2 other sectors provided they stand in a proper way. We think it makes a lot of sense.
For us, it's also Helping to prepare for the necessary acceleration towards a further electrification of final energies uses, for example, road transportation, Heating, which is already today very competitive and much better than fossil fuels. So we think this is a bold move And I think it is very ambitious and extremely forward looking document that will be hotly discussed. I mean, it's going to be Very large lobby battleground, but I believe the European Union has set a very good starting point for that
Purpose. Okay. Before moving sorry, we move now on the recovery Funds that you just mentioned, when do you expect the funds to be distributed and how?
I think this is probably a question that relates to Italy, but more or less we are in 4 countries in Europe, but More or less, they follow a little bit the same logic. In Italy, we got the approval in July. That means that a small portion The total funds allocated could be paid in advance as early as the Q4 of 2021 should the Italian government and the EU define Through a specific agreement. This is an agreement that the 2 governments and this is perhaps also valid for Spain and other governments. So there should be a bilateral agreement between The country and the EU, but we're talking about a small portion that it's a lot of it's about 13% or 14% of their total allocated amount.
So Quite a large
function.
We expect the first tenders to award projects, So we're talking about the rest of the money to be out In October 2021, so after the vacations. And after the project, we are initiated an investment finance by the recovery funds. Italy will be in position to ask for the disbursement of the fund. This will happen twice a year. So there will be 2 moments in each year in which this disbursement will happen.
And the request will have to be supported by the achievement of the targets that are defined under the PNRR. So First, enforcement probably end of the year for an amount that will be around 13% to 14%, Subject to the definition of an agreement between the government and the EU.
Okay. Before Bringing to another general question associated with the recovery fund. There is a super retweeted question, Alberto, that I have to ask Thank you, as the time is running by quickly, and it's about the returns associated with the 5 point 8 gigawatt that we expect to lay down this year. If you can confirm what's the EBITDA on CapEx or IRR overwork that you expect to have from this?
Well, I do confirm on both the measure in which we want to look at investments because EBITDA on CapEx is More front loaded results of a project and Iara and walk and spreads are along The full life of the plants, but for both, we do confirm that we are on the level We have targeted for in the business plan for such developments. So we are talking about 11%, 12% EBITDA CapEx and 150 basis points to 100 basis points over WACC.
Okay. We have one minute. I think that one of the most burning question That we received was about the simplification decree in Italy. So I would end with that one, Francesca, And with your comment around the degree and what you might want to make it better eventually.
Let's say that there is It's a good decree, so it's a step in the right direction. We all commented that this is an encouraging move by the government. It is not enough To unlock a real ambitious screen acceleration, so there are still steps to be made. We think, for example, Two major improvements have to do with the fact that they should fix a timing a fixed timing for the authorization process that would be binding In order for the player, the developers and the investors to know what kind of time frame they're going to We start with when they get into the authorization process. So fix a time and make it binding.
And second, Align the regional authorization processes to one model in order to remove That is a result of different regulation and different systems be implemented by different regions, which Adds to the complexity and therefore the pain in having projects authorized in the proper amount of time. I think these two things are Not yet fully implemented. They would definitely improve the text.
Okay. ENHANZE stop is an So we have a list of questions that have been answered, but we will answer directly to analysts. So thank you so much for your time. Thanks Thanks to the analysts and investors connected, and we wish good vacation to everybody and see you in September.
Thank you. Bye bye.
Thank you. Bye bye.
That concludes the conference for today. Thank you for participating. You may all disconnect.