Good day, and thank you for standing by. Welcome to the Enel First Quarter 2021 Results Conference Call. I would now like to hand the conference over to your speaker today, Monica Girardi, Head of Investor Relations. Please go ahead.
Good evening, ladies and gentlemen. Welcome to our Q1 2021 results presentation, which will be hosted by our CFO, Alberto De Paoli. In the presentation, Alberto will provide highlights of the period and will walk you through the operational and financial performance for the group. Following the presentation, we will have the usual Q and A session. We ask those connected to the webcast to send questions only via email at investor.
Relations nl.com. Before we start, let me remind you that media is listening to both the presentation and the Q and A session. Thank you. And now let me hand over to Alberto.
Thank you, Monica, and good evening, everybody, and let's start with the highlight of the period, and I'm on Page number 1. The financial performance of the Q1 came in line with our expectations. The disruption faced globally, we delivered on our operating KPI across all businesses in a context where headwinds associated with COVID-nineteen have continued to play out and some recovery became visible. We made significant progresses on group simplification sitting now at 82.3% in Enel Americas, following the completion of the merger as well as of the partial tender offer. This will set the basis for a simpler, leaner and more efficient platform in LatAm, paving the way to a strong value creation.
Now we'll move to an analysis of the period, and I will kick off with the evolution of the EBITDA at Page 2. Our plan anticipated a decline in the 1st quarter EBITDA of 13% due to the lack of some one off items booked last year and forecastable business dynamics. In particular, that drop of €650,000,000 was due to the effect of the normalization of non recurring items. Worth to remind that last year, we booked more than €350,000,000 of positive impact for the provision reversal in Spain. FX devaluation was assumed to impact our results in the quarter for more than €70,000,000 negative impact associated with lower prices hedged in 2020 as a consequence of last year depressed environment and lastly, the net effect on the short position normalization and gas wholesale in Iberia.
All these items count for €650,000,000 of reduction versus previous quarter already expected in our target and budget. In addition to these anticipated trends, in the Q1 of the year, we faced the following headwinds: a currency devaluation beyond our expectation a gas shortage and low virology in Chile, the effect of the Texas, the Texas ice storm and lower than anticipated renewable output in LatAm in the U. S. That are now back to normal already in April. These headwinds have been counterbalanced by some positive items, in particular, €188,000,000 for CO2 regularization, better volumes and higher price dynamics in Italy and Spain and the progressive stabilization of the level of electricity distributed in LatAm, particularly in Brazil that will last also in the coming months.
Let's now focus on CapEx deployed on Slide 3. We invested EUR2.1 billion in the period, an increase of 10% versus previous year. In the ownership business model, almost half of the CapEx was devoted to networks, with the remaining half allocated to the generation business, out of which more than €800,000,000 renewables. From a geographical perspective, gross CapEx was deployed mainly in Italy, LATAM and North America. Around €100,000,000 have been invested through the stewardship business model, focused primarily on Enelixir and renewables capacity managed through our ventures.
Investments catalyzed from 3rd party in the stewardship business model amounted to around €450,000,000 Moving now on our Global Generation business on Slide 4. You can see from the chart that total renewable capacity stands now at around 49 gigawatts, approaching 60% of our total installed base, up by 4 percentage points versus previous year. The green repositioning of our generation portfolio is clearly shown by the share of emission free production now at 66%. Renewable capacity built over the last 12 months is equal to 2.9 gigawatts despite the difficult conditions imposed by COVID-nineteen. Over the next quarters, we will scale up the magnitude of new renewable capacity addition, and we expect to commission in 3 quarters around 5.6 gigawatts of new capacity.
As of today, 100 percent of these projects are in an execution phase, of which 600 megawatt already built and ready to start producing, offering high visibility on their deployment by year end. Such a remarkable acceleration in future growth prospects are made possible, thanks to our pipeline. And I'm now moving move on Page number 5, where you can see that as of today, pipeline has passed the 220 gigawatts, broadening projects' optionality in securing both flexibility of capital allocation and protection of returns. Major pipeline now worth around 61 gigawatts, out of which 26 are earmarked for 'twenty one, 'twenty three period and 34 are already covering projects for the 2024, 2025 periods. Over the last 12 months, our mature pipeline grew by 34 gigawatts and 7 gigawatts moved to the execution phase.
The mature and early stage pipeline dynamics position us optimally for both the planned period as well as for the year to come, offering an advantage into the new decade of 2,030 and supporting our growth ambitions. With respect to the 19.5 gigawatts targeted addition for 'twenty one, 'twenty three, we stand at around 66 percent of the target addressed with over 12.8 gigawatts currently in execution or already built. The resilient target is covered almost 4x by the related portion of major pipeline, which translates into visible delivery risk and high confidence on achieving even more than this. And now moving to the operating achievement of global infrastructure and network. I'm now on Page number 6.
In the 1st 3 months of 2021, volumes of electricity distributed are up by 2%, showing a progressive recovery from the dynamics observed in 2020 related to lockdown measures. Going back on the evolution by geography, in LatAm, we observed a level of distributed energy almost in line with pre COVID levels, driven by Brazil, while in Europe, volumes increased 3 terawatt hours compared to the same period of 2020. Worth reminding that while in Europe, the impact of COVID was already visible in the Q1 of 2020, in LatAm, the pandemic affected significantly KPIs only in the Q2. This makes the evolution of volumes year on year even more notable and bode well for the future. Digitization of networks remain at the center of our capital deployment with a number of total smart meters installed that reached 44,000,000 resulting in approximately 60% of our total end users.
Let's now take a closer look at customers on Slide 7. Our positioning on customers strengthened in the last 12 months, both via our retail traditional operation as well as on services and infrastructure offered by M and X. 100,000 new customers have been added in the free markets, mainly in Romania due to the end of regulatory in Italy. Energy sold in the free market is up by 4% with volumes increasing in both B2B and B2C segments, recovering progressively the negative impacts associated with lockdown efforts. Looking at Edel X, the division performed extremely well.
More than 100,000 charging points have been added, reaching around 185,000, up by 2.3x versus last year. Lighting points reached 2,800,000, up 17% versus last year. 6 gigawatts of demand capacity was offered globally. And battery storage declined 10 megawatts as the net effect of new batteries, beef and some changes in perimeter. In fiber, 11,500,000 households have been passed, up 37% versus last year.
And finally, the industrial development goes together with the progress on group simplification on Slide 8. As you well know, the merger between Enel Americas and Enel Group Power LatAm has been completed on April 1, while a few days later, we announced the final results of the voluntary partial public tender offer for the acquisition of Enel Americas, Chiristan, that was launched in connection with the merger. The 2 transaction Hallo Land, entered to increase its stake into Ener Americas to 82.3%. Now Ener Americas' new structure is aligned to the one of other subsidiaries with the group, and integration of renewables will unlock synergies and will reduce operational and financial risk. The successful completion of these two steps allow us now to focus on the next leg of this project.
We are looking forward to sit down with the remaining shareholders to define the way forward for Enel Americas, focusing on implementing the strategic option that will maximize value creation in LatAm. Let's now open to the section on financial results. And I'm now on Page number 10. EBITDA stood at 4,200,000,000, in line with expectations for the quarter as discussed before. Group net ordinary income stood at €1,200,000,000 FFO reached €2,500,000,000 up 24% versus the Q1 of 2020.
And finally, group net debt stood at €45,900,000,000 increasing by 1% versus the end of 2030. Now we move in the composition of EBITDA on Slide 11. We refer to highlight that renewables and networks account for almost 70% of the overall ordinary EBITDA. In the period, retail and networks activities showed a resilient growth, driven by the progressive recovery of electricity distributed on our grids and sold to our customers. In terms of geographies, the bulk of our EBITDA comes from Europe, which accounts for more than 75%, while the remaining portion is generated mainly in LatAm in the 22% share.
Now we will move into a different analysis on the results. And so we are now Slide 12 on Global Power Generation. The EBITDA of Global Power Generation stood at €1,500,000,000 And in Green Power, 14,000,000 EBITDA came in at around EUR 1,100,000,000. The main operating dynamics are as follows. We have the contribution of new capacity installed in the 2020, mainly in U.
S, Brazil and Spain, that impacted positively for around €45,000,000 Then we got €30,000,000 positive coming from an increase in volumes of 2.1 terawatt hours, mainly in Italy and Iberia. On the other side, this positive impact have been offset by the following negative dynamics. Around €50,000,000 from the storm in Texas and the exceptional suspension of gas delivery from Argentina and wheat hydrology in Chile. Around €60,000,000 from FX devaluation in LatAm and the rest LatAm and the rest associated with a decrease in energy prices as a consequence of last year, particularly depressed at least to market due to the pandemic. And this is for the additive in power results.
Conventional generation, the red part in the chart, including EBITDA decreased by 30 6% versus last year. The underlying performance have been affected by the following dynamics. On trading activities, trading activities are back to the pre COVID performance and this contributed negatively for around €140,000,000 compared with last year. On the conventional generation, we recorded minus €75,000,000 due to the decrease in hedge power prices made in Italy, Spain and Chile, minus €35,000,000 related to lower volumes as a consequence of coal power plant closure, minus 25 from the currencies devaluation in Latin America counterbalanced by efficiencies we call in Spain and Italy. Worth to highlight the period have been affected by the CO2 liberalization in Spain, which had a positive impact, while last year performance included around €470,000,000 associated with the provision of the Suezmax.
It will affect our counterbalancing, so the net effect is almost 0. Let's now take a look at our infrastructure network on Slide 13. Operating EBITDA stood at €1,700,000,000 down 11% versus last year. In the quarter, we recorded €180,000,000 negative impact of non recurring items such as the provision reversals in Spain, negative compared versus last year. And €80,000,000 negative impact from currencies devaluation in Ghana.
Net of these two items, EBITDA would have increased by 2% or €35,000,000 And this increase is driven by €80,000,000 increase, positive increase associated with investment deployed for digitization of our grids and to improve the quality, around €25,000,000 positive of efficiencies. And these positive items were partially offset by €45,000,000 negative impact from regulatory adjustment and CPI on our incentive. As a result of our ongoing investments, Saeedi, so the quality of our networks have improved by 6%. So Saeed decreased 6%, that means quality has improved for the same amount. From a geographical standpoint, in LatAm, excluding the FX impact, EBITDA increased by 2% versus the same period of last year, benefiting from the tariff indexation and the increase in volumes in Brazil.
While the performance in Europe demonstrates once again the resiliency of our networks supported by solid regulatory frameworks. And now we move on retail on Page 14. EBITDA came in at €900,000,000 with a progressive recovery from the extreme condition experienced in 2020 associated with the COVID-nineteen pandemic. The group expanded its free market customer base by adding 900,000 new clients over the last 12 months on the back of the end of regulatory in Romania and the increase in the customer base in Italy. Cost reduction effort continued to progress with OpEx per customer down by 5%.
Looking closely at EBITDA, free market EBITDA is almost flat, thanks to a better performance in Italy, mainly attributable to a 5% increase in volumes, which compensated a 4% decrease in Spain. In Italy, EBITDA increased 18% year on year or around €95,000,000 driven by a pickup of volumes in both B2C and B2B segment and embedded marginality with unitary margin up by 14% on average. In Iberia, net of non recurring items, EBITDA declined by 20%, mainly driven by lower volumes in the B2B segment associated with the economic deceleration for the industrial segment still affecting pain by COVID dynamics. This has been partially offset by an increase in the B2C due to higher unitary margin and the reduction in unitary margin from the B2B segments, partially compensated by a higher margin by around €20,000,000 due to the end of the regulatory tariff as already commented. Regulated market EBITDA is down around €20,000,000 year on year on the back of the elimination of the regulatory tariff in Romania and the decrease of the regulatory customer base overall.
In the next slide, we will show in detail the timing evolution during the period, and I'm on Page 15, Where you can see that ordinary group net income came in at €1,200,000,000 down by 5% year on year on the already commented dynamics at EBITDA level, which are smoothened by better results recorded in all the other lines of the profit loss. D and A are almost in line versus previous year. As a consequence of lower depreciations, thanks to the impairment made in 2020 on coal assets in Chile and lower bad debt accruals compared to last year, which was affected by COVID-nineteen. These two items totally offset the impact of the investments deployed. The reduction in financial expenses derives from a few different moving parts.
1st, lower net financial expenses by around €35,000,000 thanks to the efficient debt refinancing carried out during the last 12 months to reduce the cost of debt through lower interest based instruments and hybrids. And second, lower other financial expenses by around €150,000,000 mainly related to the impact of interest accounted for the CO2 regularization in Spain and the negative effect in the valuation items exposed to a Czech exchange rate in 20 20 20. Equity investments contributed €31,000,000 taxes decreased by around 140 €5,000,000 driven mainly by a lower level of earnings before taxes and tax rate at 30% versus 32% last year. And minorities decreased by 25%, reflecting the increase in Latin America and in the Chilean stakes and the higher contribution of Italian companies. Worth to remind that in April, we reached 82.3% should hold in Latin America following the completion of the MESH and the PGT.
So in the next quarter, you will see a further reduction of minorities to this other increase in our stake. And now moving to cash flow on Slide 16. FFO stood at €2,500,000,000 up by more than €400,000,000 versus last year, supported by an improvement in working capital, which recovered from the COVID-nineteen impacts. Cash conversion improved to 61% versus 43% last year, as 2020 numbers were affected by the provision reversal in Spain with no cash impact and the pandemic on working capital. In more details, the dynamics underlying the FFO evolution can be summarized as spoken.
Lower EBITDA versus previously already commented, lower change in provision mainly associated with lower bad debt approvals, net working capital at minus €800,000,000 improving significantly versus last year, thanks to the recovery of the COVID effect, which impacted negatively for €400,000,000 in the Q1 2020, lower taxes paid mainly due to advanced settlement tax payment at the end of last year. Free cash flow to the €500,000,000 positive with capital expenditure fully covered by the operating cash flow generation. And now take a look on the net debt on Page 17. Net debt is equal to €45,900,000,000 at the end of the quarter. Changes are driven by positive free cash flow of €500,000,000 already commented, dividends paid during the Q1 of the year for €2,100,000,000, €100,000,000 associated with our active portfolio management, Hybrid bonds accounted as equity, a negative impact from FX of about €1,000,000,000 Gross debt stands at €58,300,000,000 in reduction versus December, thanks to our effort of cash optimization.
And now before the closing remarks, we take a look on our guidance for 2021. This quarter came in line with our expectations. As commented, on top of what was expected, we recorded some unexpected dynamics, both positive and negative and offset each other in the period. Some of these dynamics are not entirely Q1 related, but will extend also to the coming months. On the negative side, if currencies remain weak compared to plan assumption, today mark to market suggest a potential impact of €1,000,000,000 This estimate assumes a persisting and pessimistic strong devaluation of effects across the board, while we see potential improvements coming from the rollout of vaccines and exit from the pandemic.
On the positive side, the initial signs of recovery from COVID-nineteen are expected to last and accelerate along the year, such as the increase in volumes and prices. Furthermore, the group will continue to create value through its strategic setting. Our ownership business model, which will drive our industrial growth and is showing a delivery in line with expectation even in a challenging context. The Stewardship business model also confirmed by the recent announcement of a fiber deal on which we can leverage to face further headwinds, if any. In light of this, we have full visibility on our full year delivery and we can confirm 2021 guidance of both EBITDA and net income level.
And now some closing remarks. As just commented, our full year 2021 guidance is confirmed. We have full visibility on the acceleration of renewables capacity installation with around 5.8 gigawatts, new addition expected at year end and almost 66% of our 2021, 2020 target already in execution. All this coupled with an extensive pipeline, which covers around 4 times the remaining addition for the period. As scheduled, the Anglo General Meeting will be held on May 20, and we will approve the final dividend payment in July based on 2020 results.
Worth to remind that for 2021, we have set a fixed remuneration for our shareholders with a DPS of €0.38 implying a 4.5 percent dividend yield and a double digit shareholders' return. Thank you for your attention, and let's now open the Q and A session. And I give the floor to Monica.
Okay. Thank you, Alberto. We open the Q and A session. I want to thank all of the analysts that sent the Q and A through. In particular, we received questions from Stefano Bezzato, Credit Suisse Jose Ruiz, Barclays Lillian Starke from Morgan Stanley Emmanuel Euugione from Banca Accro, Luda Schumacher from SocGen, Javier Suarez from Mediobanca, Rico Bartoli from Stifel, Manuel Palomo from Exane, Harry Wybols from Mary Lynch Antonella Bianchetti from Citi Alberto Gandolfi from Goldman Sachs and Javier Garrido from JPMorgan.
So I'll start from a few general questions. First one, we saw a few negative one off in the quarter balancing out with positives at EBITDA level. Do they impact your net income? How this clean net income would compare to last year?
Okay. So on the net income impact on what we commented on EBITDA. Well, converting to net income impact, we may say that the net difference between the nonrecurring items in 2020 2021 is overall negative on net income for around €50,000,000 Then we had other headwinds that are the and storm and the gas shortage in Chile. So we'll total another €50,000,000 of negative impact. So we are around €100,000,000 of negative impact.
If we take out these 2, the deal would have been around 3% increase. And if you see and we take out also the FX impact, net income would have an increase of roughly 7% year on year.
Okay. Second question, currencies remain far away from your scenario assumptions. Can you share with us what is the expected impact for 2021?
Yes. So we have commented already that today, the mark to market of the currencies is approximately EUR1 1,000,000,000 from impact versus the target we presented to the market in November. But we think that so we are still in a period in which it's not clear what is the direction of effects together with the exiting of the crisis. So we do expect this potential impact may be lower than this. Having said that, so now so we are considering this as a worst case and we are sort of acting and moving all our action plan to cover a possible worst case like this, what we expect it to be, so less than this at the end of the year.
Okay. A few questions on OpenFibre. The first one is, can you detail the underlying components of the capital gain for the
deal? Yes. So I think you follow the news and then finally, we will sell the entire stake we own in Open Pharma, it's 50%. The capital gain expected is around €1,700,000,000 and it includes any further payment of capital injection agreed with the other shareholders. The expected net result 2021 over Fiber until the closing date.
In this calculation, we don't include any potential contribution coming from the earnout that we have agreed in the final agreement on the selling.
Okay. Alberto, analysts are asking, which was the contribution to net income of OpenFiber in 2019 2020?
In 2019, we had a negative contribution of around €60,000,000 while in 20 20, the contribution was 0, but only because Open Fiber accounted for a nonrecurring fiscal benefit, which completely offset the underlying negative result coming from the operation?
Okay. I think this question refers back to the capital gain. How much that capital gain was included in your business plan assumptions?
Well, when we made the assumption, we had a potential deal of around 40% of the stake and not 50%. So before this, we had forecast of 1.4 percent that now is 1.7
Okay. Next one is when do you expect the deal to be finalized and if you see any risk that the deal is not finalized by year end?
Well, so we think that we are going to close during the Q3. Today, we have just completed the signing phase. Now we are opening the phase for all the authorizations needed for the deal. We don't see any major headwinds, we think, Sony a month of time, and we foresee the closure in the Q3.
Okay. To close on fiber optic topics, can you comment on your potential interest in UFINET?
Well, UFINET is a very good company that makes the same business of OpenFiber in Latin America based on Central America and in the countries which we operate within our distribution networks. In 2018, we both had 21% stake for €150,000,000 of cost. And in the agreement was included a call option that can be exercised by end of December 2021. Now looking at potential partnership, cost of the coal, potential development that we may do in the area, we will sort of take a decision during this time if exercised the call or not. And so we'll go ahead with the development of this business also in Latin America after the good, very good results or having done this in Chile.
Okay. We go back to the topic guidance. You have an EBITDA target for 2020 ranging between EUR 19,700,000,000 and EUR 20,300,000,000. Taking out the contribution of Open Fiber in 2021, there is quite some road to cover. Can you walk us through the drivers to get to the 2022 guidance?
Well, so there's we have plenty of moving parts. So that is a very, very strange period in which we have a lot of moving parts. And I can say that on one side, we have on the ownership model, I think that one of the most promising drive out of the full recovery of COVID and possible extra recovery in the year, the 1st year of completely exiting the pandemic. We have on the CapEx side, the main way to improve our results. I'm talking about a complete reinvestment of the FX impact on our CapEx.
You know that out of compressing a little bit our EBITDA, so the level of investments is also compressed. So we are reinvesting directly, so the compression of CapEx. And this year, we are also accounting for roughly €600,000,000 €700,000,000 of extra investment, not impacting the financial position because are related to the FX impact on our CapEx assumption. The second is the next generation new that now is in the final decision and then we'll start the action plan. This will drive further increase of investments not impacting our financial position and also further increase of returns and extra returns that may be followed by this kind of the investments granted for the grant that would be devoted to the development of this project.
And 3rd, so we have a very, very good compromising financial situation. So we can push strong on using our balance sheet to increase our current investments. In many parts of our business that needs an improvement, there is distribution, we can increase the investments and the weight of development of new wholesaler. We can increase the weight of customer acquisition and that we will do. So we have plenty of things on the ownership business that we can push on to fill the gap for 2022.
And then so we have just started with our stewardship model. Over 5 years is a good example, but we have plenty of other way to develop any value on this model. And we are working on several parts in all the business line to implement this model and also the value creation. And for sure, portfolio rotation is our guiding start. So we have today that there are huge amount of a huge valuation of several assets using a clever asset rotation may create value and other opportunities for the
region. Okay. Next is on financial performance in the quarter. So what was the impact of COVID in the quarter? How much you expect COVID to account for in your numbers for the full year?
Is there any residual risk that you see on your business?
Well, what in the year now we are experiencing a gradual recovery of post COVID. It was that is what we have assumed in our target for the year. So looking at from the side, we haven't got relevant impacts at EBITDA level. KPIs are now going back to more normalized situation. And so this is the Q1, but so we foresee this for the full year.
So we don't expect significant impact. It's clear that impacts coming from the next the last year to this year are already now as the expected results. So we were obliged last year to cover a part of our energy with a very, very low prices. And this is something that we still have in 2021 that we will not have in 2022 because the part that we are hedging now is now hedged at prices that are in line with the 20 19 prices though, but we got 2 years to pass. So the COVID-nineteen impacts on numbers.
Okay. Can you please update on the regulatory situation in LatAm, particularly in Brazil?
Well, Brazil is still open. Enel now has opened the 3rd phase of public hearing and to further discuss the economic rebalance. We think that a final decision may come in the 2nd semester. And during this time, a lot of tariff adjustment have been done in Brazil with so keeping an eye on not increasing the impact on the customer bill. And but so managed in a way in which the distributors are not having any economical impact.
But so the final decision in the second semester after another public meeting now is going to be held.
Okay. And in Americas, when do you expect the kickoff of the 2nd phase of restructuring?
Well, we have just finished the first phase and now with 82.3 percent of the share capital. So we are going to complete the phase with all the contribution of the assets and formality. After this, we think that we may open the table with the remaining shareholders to define a common view of the best way to advise the presence in the Latin America business. And I think that this is something that is going to start in the second half of this year. And so we will see some action at the end of this year.
Okay. Next, following the approval of the National Recovery Plans, can you quantify the additional investments compared to your current business plan?
Well, so we have presented a very comprehensive plan on different business or networks represented for Smart Greece, digitization, the renewable integration. On renewables, mainly all the investment related to hybridization and through storage and of our renewable fleet. On customer side, on analytics, everything related public charging infrastructure, buses, smart grid needs and reports. Well, now we are expecting the final outcome. We think that around the projects we have presented, we may expect an increase in the range of 10%, 20% of the overall €24,000,000,000 of investment in Europe that we have year marked in our plan for the new development.
This is something that will come at different Slide Allow Brands and that may add profitability and extra profitability to our overall European plan.
Okay. We move back to Italy. Are there any updates on timing around the simplification decree in Italy? Is the approval of this dependent on the reform package of the new and the new government that the new government wants to implement?
No, the approval of the simplification degree is independent from the package And the simplification measures will have to be adopted by a decree to be approved at end of May. And certification effort will be centered, streamlining the environmental laws and procedures. We aim to cut excessive length of the administrative and bureaucratic procedures and so through this way to cut times for, in our case, for renewable development.
Okay. Last one before getting into the business related question. Has the opportunity set for Enel X changed in the context of the U. S. Climate Plan and EU Recovery Fund, particularly considering the focus of these plans have on infrastructure like electricity electric vehicle and charging infrastructure?
Well, I would say definitely, yes. So this focus on for Enel X, mainly on electrical for sure the whole sector and for analytics, it is one of the main actors active in the United States.
Okay. We kick off with the business question related session. We start with global generation. COVID-nineteen imposed a slippage of 800 megawatt renewable capacity from 2020 to 2021, but they were not delivered in Q1. Can you give us a bit of color on why this slippage happened?
Well, one important point is yes. So last year, we had this leakage avoided that we need to have some countries because of COVID impact. I want to stress the fact that we have a very, very rigid way to account the new megawatt. So for some reasons related to the final technical green light, we had already 800 megawatts already built that for me was not ready for all the checkpoints to be put into the megawatt in the court. They are already in that.
So I would say that no delays at the Q1 out of some formality of these 800 megawatts. On the rest of the year, we have now visibility, plenty of visibility on the other plants under construction. And we have today no delays versus the final target.
Okay. Which I think also answered the next question that was about the target for the full year of 5.8 gigawatt. As the Q1 seemed to be lower than expected, analysts are asking if we can still meet the target, and I think you just answered to that question as well. Next, is there any region where you have seen a more notable change in competition in the renewable market, either easing or intensifying?
Well, competition, as said, has been always fierce on renewables. So having said that, we don't not see any notable changes in the competition level. I want to stress the fact that competition, first of all, it's so renewables development is not a one field battle. It's now many fields in which different way which you can develop renewables. If you look at tenders, I would say tenders are so a crowded space with crazy prices offered and a space that is almost impossible win a competition.
We are not facing this competition because we are not participating such a space. But all the other fields of renewables are open. Competition is not fierce, is a good competition also because it's not a competition against very little developers with only one project that so are dead or alive if we intend it because only attending the win because it's the only way to finance the project. So having said that, now that new big companies are entering the space, we think is the best way to manage this new space. It's so huge.
It's growing so fast that big companies are very rational in their choices. So we'll change the competition in a way that we prefer.
Okay. Next is on the performance in North America. Can you walk us through the performance in North America? Industrial development?
Yes. We have some moving parts. So one is the cold spell in Texas, and we already commented it. 2nd is low flow wind resource at the beginning of the year. So the Q1 was very low in the United States.
Now the things are changing. April and May have been good months, so real and also the beginning of May. Then we had some technical issues that are sold in a plant in North Dakota that we are now putting in the line. So we think that so now there is a gap to be recovered as we are working to recover it as we had Texas cost balance and headwind not expected. The others are normal things that happens in a country.
And so we have plenty of things that we may activate to go on again.
Okay. Coastal in Texas, so we stay in the U. S, you have indicated a very limited impact. Can you please explain why you have been less affected at other companies? Is there any further downside risk to this level of impact?
Well, so we had a limited impact because only one contract significantly affected the acquisition. So all the other part of our presence in the area and be almost completely hedged. And now we are activating, we activated all our legal rights under this contract for the condition experienced. For the time being, we see no further downside in this guidance.
Okay. Hydro availability was an issue in Chile, but better elsewhere. Can you provide a summary of resource availability so far and your view on the year?
Well, it proves a very relevant fact going forward. The being global and developing renewables everywhere is reducing the overall risk for several parts of our business. So one is the production, because it's frequent that you have countries with a high performance, countries below performance. But so the all in all effect is a net effect of all these headwinds and only one trend, there is a trend of growing production because of the increase in installed base that we are doing. And 2021 is exactly the case.
And because of this, we see that while we had this reduction in Chile, but we are having very, very good results in Europe. And so having said that, we have also different way or different prices. This may, at the end, be a positive headwinds that we are following to have already said to have and to cover some FX effect that we are experiencing on the other
side. So coal phase out. How much coal capacity are you planning to close in 2021?
2.9 gigawatts, 2.6 in Spain and roughly 300 megawatts in Italy. It's clear that we are ready, ready, so we are waiting for the final authorization of the various TSOs of the countries to have the final real life to finish the presentation.
You have shown prices impacting negatively the results of the quarter. Can you please explain what drives this in light of the high level of forward sales that you have across your markets?
Well, as I said, the very point that are impacting the results on prices this year is because we have to compare the hedge prices in 2020 and the hedge prices in 2021. So having said that and having said that, so we covered our production last year with a very, very depressed scenario, this is the overall price impact that we are experiencing this year. Today, we have roughly, say, EUR 130,000,000 of less of impact coming from less prices. Worth to say that it is not something that is expected for 2022, where the production is now we are hedging 2022 production at prices that are in line or even higher than the prices we had in 2019, 19 because now we are benefiting on a very, very high price because of the CO2 prices and because of the cycle of commodity that is coming back to normal or higher level prices than the freight prices level.
Okay. The next question on the short position. Can you provide more color on the negative impact associated with the short position in Spain?
Vale as it's not a negative impact. It is negative compared versus last year. So today, this year, share position is almost is around 0. It's not impacting the business. But because last year, because of the high volatility of prices, it was very, very positive.
So it was so what we said, so the comparison between the two situation is explaining the negative impact that we are seeing.
Okay. We move to Networks. Following the interest of WPD network in the UK, are you looking for any other assets? Have you already identified a target in the U. S?
Or would you consider to add assets in LatAm? What would you what would drive your preferences in terms of which grid asset to buy?
Well, first of all, one important specification. The WPD interest by us was related with our stewardship business model. I remember that applied to the grids network is the way in which we so we foresee to buy a minority stake in a business, gathering funds for the majority stake. And through this position to offer to the Greece and the other shareholder, our this is in terms of managing the network, using our platform and bringing the network to our international level for purchasing the assets and through this way creating value, operating value along the time in which we are and we stay in the network and creating value, selling the stake together with the other funds when we exit. This is WPD.
And this is not so our ownership business model, which we are seeking for buying the network, new networks and managing 100% them in our ownership business model. Having said that, it is important because WPD is only that way. We are keen to do both the side of this business in all the countries in which we think that we may create value managing the networks to also our capabilities. United States will remain a key target of our further expansion in REITs for both the business model because we think that we have there is a huge opportunities in the U. S.
To make business because of the energy transition is going to happen, because digitization is going to happen, because there is a big need of modernization of infrastructure. So this is would be something that for us is relevant. But you will see us looking at some part of the world, approaching the country with a different business model depending on the countries and depending our aim to create an integrated business only to its value managing a core part of our distribution assets. Latin America, on the ownership business model, we think that we are now in a good position. So we do prefer or to do some asset rotation only to manage a little bit our asset base.
But you will see us maybe focusing on other parts of the world to build the development of Greece.
Okay. We move to retail. Can you compare the retail markets in Spain and in Italy in terms of competition by customer segment today?
Well, competition is fierce everywhere. So if you compare now in Spain, you have roughly, say, 300 power suppliers. In Italy, we have roughly 600. So this is the number of competitors in 2 countries. So competition is there.
Market share are different, because in Spain, we have roughly 50% market share and in Italy, we have roughly 44% market share. And today, so if we see this competition, we think that in Spain is a little bit higher because I think so it's now driven by reposition of other big companies that are trying to take some stake. But so in the churn rate is by far higher in Spain than Italy. This not means that an iron term rate translate in a reduction in customer base. You have to do to keep your customer base stable and this is what is happening in this space.
Italy is a little bit lower, mainly because we are still on the big tranche of regulatory tariff. So we have a big number of customers. And so this is reducing a little bit the competition that today is only focusing in Spain.
Okay. Another one on retail. Can you provide more color on margins for B2B and B2C for both Italy and Spain?
So dividing in segments, I think, is the best way to look at it. So the residential segment proved very strong in Italy mainly, but also in Spirulina. This is because an increase in the unitary margin. This is mainly in Italy. Spain is almost flat and also with an increase in the average consumption.
So residential segment, very good in both markets. On the B2B segment, Italy, very good expansion of unitary margin and stable volumes. Iberia, reduction in unitary margin and also a reduction in volumes that we believe could. Here, as I said, we think that the exiting from the pandemic is slower in Spain than in Italy. So we do expect following the vaccines to have a vaccines to have a road to recover of the B2B in Spain that will be skewed towards the next quarters.
Okay. Before moving into the last question of Q and A. I have a flow of questions coming from different analysts and investors around the guidance. So just to it seems that someone is not squaring the numbers. So the first one is a clarification around the guidance for full year on EBITDA?
And Alan is asking if we confirm the guidance even if the currencies are staying at the current mark to market?
Yes. As I said, we confirm the target set because as said, we are working on this worst case scenario. So we classify this as a worst case scenario, but we are working on it. So it's clear that everything we may do on the stewardship business model, this is plenty of things that we can do. But on the other side, I said also on the ownership side, because of the size of volumes and prices and what I said, remember that.
So if we have volumes increase in Italy, in Spain, these are not hedged. So you have a double increase coming from the increasing volumes and the fact that these volumes are facing spot prices that are in the range of 45 and 60 in Italy. So this is a big increase. We are working also on some parts of the world in adjusting some tariff indexation we're seeing. So there are discussions open in Argentina because we know that Argentina has raised tariffs in the last 2 years with a CPI of around 40%.
So it's clear that now, the board is open and may be closed within this year with some benefits and other moving parts that we are working on. And so that's why we confirmed the target at the EBITDA and also at net income level.
Okay. Contributes to the target because it seems it's contributes to the target, because it seems it's too big to squeeze into the targets. So they're basically asking about the translation from EBITDA down to the bottom line.
Well
And if any measures sorry, and I add another part. If any measure might be taken in order to compensate for this big capital gain and bring the positive forward to other years?
Well, as I said, it's clear that this capital gain allows us to reach the target. And as I said, it will help us also in so doing some actions that may increase the level of results after 2021. Now we are looking at several things that we may do. One of this is that we may address a plan to fully refinance the part of the debt that is already out of our sustainable finance effort on one side and that is bringing a cost that is already linked to a level of interest rates that was the level that we experienced, say, 7, 8 years ago. These are so a level of debt is going to expire in the next 3, 4 years.
We may use a part of this to sort of accelerate this pipeline. I've seen a time in which we are still experiencing a very low interest rates, but seems to be the final time of this benefit. So this is suggesting us to rush to close this position for, so we can use some part of this capital gain to finance this expectation. And this is one of the a lot of actions we are assessing to work around the results and to benefit also in the next years of this capital gain.
Okay. We move back to the P and L questions. So P and L items came out on levels that seem to point to an improvement of the values embedded in 2021, 2023 plan. What should we expect for the full year on D and A, taxes and minorities? Financial expenses recorded a significant reduction.
What is the plan over the next quarters? And what's the level of financial cost that you are expecting for 2021?
Well, I said, so we don't see any major change related to the numbers that we have earmarked for the items below EBITDA. We think that we will have the D and A that would stay at around €6,700,000,000 at the end of the year. Tax is €2,700,000,000 and minority is €1,300,000,000 When it comes to financial expense, remember
Sorry, you put your hand on the mic, and we couldn't hear you for a couple of seconds.
Okay. So I was saying that reduction in financial expenses is not entirely related to the refinancing activity. As said in the presentation, we had a one off of roughly €120,000,000 €150,000,000 related to the fact that the CO2 dispute that we won had a positive impact on the bid down one side, but another impact on financial cost because we dropped the interest on we paid some years ago. And so we piled up interest that we accounted in the financial expenses. Out of this, we have normal trends that are already earmarked in the target that we have for 2021.
Okay. Remaining on the net debt and financial expenses territory, Net debt remains pretty stable. What should we assume for 2021, looking to have a net debt on EBITDA of 2.7 times?
Yes. So we'll stay on this level. The impact on the Q1 is so related to some time effects on some part of the cash flow that will be fully recovered in the next quarters and will bring the final result at the level that we have foreseen our target that will represent the 2.7x net debt EBITDA on a QPI.
Okay. Last one before moving into the question that we received last minute from analysts to our email address. Could you please specify the amount of issued hybrids at the end of March 2021? What is the amount of these hybrids? And which one you are including your net debt calculation?
We have a total hybrid in March of around EUR 6,800,000,000. Out of this amount, €2,200,000,000 are included in the net debt, while the remaining €4,600,000,000 are accounted as
equity. Okay. I think we can now move to the question that we received from the web. So the question number 14, are you interested into ERK's hydro CCGT assets in Italy?
Well, so we well, I would say that everything that is moving in Italy, we are interested in looking at it. So yes, we will look at, So it's a plan that we know very well because it was part of our asset base. It's a very good asset. We think that hydro production may be useful in a situation in which shutting down coal will bring our position long to customers and covering the long position to customer with renewable capacity is in every countries in which we act something that is relevant for us. If you combine this with the fact that Italy is a little bit laggy behind in the development renewables because of bureaucratic impact that now is going to be solved by sort of the simplification decree, but so it will take some times to a level of development, I don't know, like Spain.
So these steps may be useful. It's clear that it has to be useful at the right price. So we are not ready to buy an entire price to look at these assets.
Okay. Sorry, just one. Going back to the capital gain of OpenFiber, an analyst is asking if the EUR 1,700,000,000 capital gain can be considered ordinary?
Well, yes, because this is part of what we said is our stewardship business model assumption that we said in our plan presentation in November that the first way to look at the situation business model, we will count an accumulated EBITDA produced in the next 10 years of €17,000,000,000 And in this €17,000,000,000 we have different components that are 1, so the products we sell directly to our platform, the products and services that we sell to our platforms to joint ventures and the third is the capital gain that we may do in buying and selling stakes from the joint venture that we have created. In this case, OpenFiber is the first. Other will come because we have we talked about the UFINET before. UFINET is another way to create value to this kind of business in different parts of the world. Then so in this will be applied in to other business lines a different way to create value, but say so within the Steward should be smaller hats.
Hats. Okay. I'll go back to the question from the web, question number 10. On the short position in Spain and generation and trading margins, is there any actions that Enel is taking in order to regain a level more close to the Q1 2020 in the near future? Conversely, is the Q1 2021 EBITDA to be considered as a reference for the future?
No. I say, so the short position is not related to actions that we may do. It's a situation of the market that may suggest that it's better to buy energy instead of producing it. So it's rather complex, but easy to explain. So it's clear that way in which the short position acts is a short or a sharp reduction in prices that suggest that it's better to buy instead of producing energy.
It's clear that so the way in which you so you are exposed to this is the level of hedging that you do. But because we don't want to have any higher level of risk, the position a normal year like this year is neutral, is almost ranging to 0. And so that is open to be positive if you see a sharp decline in the prices like happened in 2020 because of in this case, because of the pandemic, other years we got for a different business.
Okay. Question number 13, Enel keeps reducing its average cost of debt. Can the company continue to do so if bond yields keep rising?
Well, I said this. We have 2 ways to reduce our debt. The first is, so now the residual bond to be refinanced are bringing a cost, an overall cost of, say, 5%. So it's clear that we are not at that level. So also if we wait, we will get a steep reduction in this cost.
On the other side, I remember that the sustainable bond that we issued the first time 2 years ago now are becoming mainstream. And through this way, all the issuers are getting a discount versus their normal bond that is in the range of 20 basis points, 25 basis points like we did. So these are these two steps. The 3rd deal is, as I said, because we are having some space in our net income headroom because of the capital gain, we will move in so fastening the refinancing of the residual debt. We will try to have a big tranche reliability management this year to cover in advance potential, so increasing in interest space that are going to happen.
Okay. Question number 9. What is your expectation for Brazilian distribution rates in 2021? In particular, do you expect a regulatory intervention during this year?
Well, no. So a regulatory intervention, there is so a local rule regulatory intervention, no, there are no intervention. We do expect an intervention, as I said, for the economical recovery of COVID. It was due last year. Now we are at the third phase of options to understand what is the overall impact and the amount.
There are a lot of tables open, but in several countries and several distributors in Brazil, I would say that some tables have been closed with positive outcomes not so relevant. So we are not talking about big amount, about €10,000,000 €15,000,000 every table. But the attitude overall is to close positively the stables also because you are not going to give or not still answering on the big request for the economical restoration, but so you are inclined to have sort of positive stance on the single request and table opened. Okay.
Question number 11. The improvement in supply in Italy driven by both margin and volumes is expected to continue over the coming quarters?
Well, yes. So we expect the trend continue. We are doing extremely well in Italy, in acquisition and also in the margins and energy sold. We are just starting to have combined selling with Enel X and a lot of products that are going well. So I think that Italy this year is set to going on in these positive trends for retail.
Okay. We go back to OpenFiber capital gain, Alberto. Sorry for that. So there are a number of questions around how the capital gain translates into net income, in particular, what's the tax regime that is associated with the gain? And if this capital gain how this capital gain is included into our guidance?
So how much of the EBITDA translates effectively into our guidance?
Well, capital gain, the effect on net income is almost the entire level of capital gain. So taxation is very limited on this kind of capital gain because they benefit what is the participation exemptions in Italy. That's why. That said, this will create and constitute a big base to start some program like the liability management asset because it's clear that it's entirely or almost entirely flowing to the net income results.
Okay. So just to be clear, there will be some compensation down to the P and L?
Yes.
Okay. Question number 8. 1st quarter other financial charges. If ForEx stays where it is now, is the drop in other financial costs reported in Q1 sustainable throughout the year? Or could it be reversed later in the year?
Well, as commented, so I said that this is CO2 regularization space is the main impact. And so if we freeze the ForEx scenario at the level it is today, we think that we can maintain this positive gap year on year. It's clear that on the other side, as I said, so if we will run some liability management opportunities that may affect the result of the years, but so it's going to have to be the next years is going to be benefiting from this activity.
Okay. The question number 7. Free customers in Italy at the end of first quarter were €9,600,000. Your planned target is to reach 18,500,000 customer by 2023. Is this still a realistic assumption how lower customer base would impact the EBITDA?
Well, the 18.6 500,000,000 customers is a level reachable at the time in which so the end of regulated tariff will come. Now so it's going to be delayed. It's been delayed another year and year and half. And it's compatible with the fact that Enel will maintain the market share that today has on the free market. Remember that today, so the regulated market, it is not a market, so the regulated tariff because remember that the market is still open 100%, but in the market is present, the regulated tariff and the customer are free to stay in the regulated tariff or to exit it.
So the expiration of this regulated tariff under which the business is a business that is only based on cost compensation because energy is provided by the single buyer. And so companies are only compensated by the commercial cost and the operating cost on customers. Is something that is going to be reduced every year and video delays in this part of market is going to be reduced because customer are exiting the tariff as are entering the free market, not only because of the commercial effort of all the actors in the market, but also because now that the energy is becoming more central in the energy transition. So having a full range of services instead of only 1 is changing the attitude of customers to have different actors that will offer them full range of services. And having said that, it's clear that the realistic assumption is really on the time of the end of the regulatory tariff.
Every delay is not impacting us a lot because at the end, so we have time to move customers out of the regulatory tariff, we and the others, so the market will be little than today. And on the other side, because at the end, having this market is not giving us any major results. I think that at the end of 2023, so that everything will be done, but if further delays will be adopted, this will not impact a lot on our numbers. It will not only impact on the number of customers we count on free market, but not on markets and the finance out of the business.
Okay. Question number 4. Your renewable pipeline is way larger than the capacity you aim to build over the next 10 years. Which success rate are you expecting from the pipeline if successful? Would you consider selling some of the projects?
Well, we have to develop 100 gigawatts of capacity in the next 10 years with the ramp up. Just now in the 1st 3 years, we'll stay around 7. And so having 7 at the very beginning of this ramp and having an average of 10, we have the last years of the plan in which we have to deliver 13, 15 gigawatts every year. To develop a pipeline of develop a program of 1 100 gigawatts, you have to have 300 gigawatts of late stage pipeline. So it's not since the beginning, but more or less to have will be plenty of possibility of choosing the best project that we have to work in this level.
So having 220 gigawatts a day is not enough at all. We have to increase hugely our pipeline. You will see us doing this and you've already seen it because we have increased 30%, 40% of the pipeline in the last 6 months, but you will see a steep increase in the next month because we have to reach very soon a level that will comfortably cover really the development we are foreseeing for the next 10 years. Having said that, 3x is a high level of coverage and because it's the only way to have some tender one, but because of our development is not only through tenders, it's clear that we may have some excess of project in some countries in which we have already reached the level we were sitting for. And in this case, so you will see us be keen to sell the project.
And we may do it in selling the project and stop all creating, as said, a stewardship in our stewardship business more than some joint ventures with funds that may have lower cost of equity of ours. So they may, in this case, buy project that we are not developing because our request in the return of investments are higher than the joint venture we can establish with them. And that's why so we are pushing also the Stewardship business model because it's maybe the way to otherwise on one side our pipeline and on the other side also to sell the stake to actors that may have lower requirements. And so valorize better the stakes we have.
Okay. I have to go back to the guidance of that, to beg your pardon. But there is still a question around the difference between what we were assuming in the plan regarding the capital gain and what we are guiding now. So an investor is asking, if in the in last year guidance, we were assuming the contribution of Open Fiber. And if not, given that now we have this contribution, we decided to reinvest it in other activities.
And given that now the contribution is even bigger than what we were originally estimating, we can use it to offset some FX issue.
We were assuming already in our target the capital gain of Open Fiber, not at the level of today because I said that we were assuming a 40% stake to be sold, not 50%. And as I said, we had already put in our target some activities to bring forward a part of this effect like a said liability management or other way to act and to move value next year's life. So renegotiation of some gas contracts that are not producing cash or other way to better have to have better results in our operating business after. It's clear that now that we have an increase in the capital gain, as said, we are facing on the other side some headwinds on FX. So it may be useful that this increase may sort of cover some increase, so some negative headwinds coming from the FX, if FX will stay at the level of today or they will follow the mark to market we have today.
This is on the economical side. On the financial side, it's clearly different because the we have €2,600,000,000 of cash in because the overall transaction is €2,600,000,000 And so on the financial side, it's clear that we are going to invest this cash in to fuel our organic growth and also to make other things on so other part of the stewardship business model. As I said, we have a call option on the another piece of fiber business in Latin America that is Unifinet. Is not sure. So because we are assessing if so the coal option may drive increasing value like the OpenFib Italia and OpenFib in the next year.
And so we can decide to use a part of this Bahrain to put it in another business to create the same or we hope the same or sort of similar value in another venture that we made to Latin America.
Okay. I lost a little bit the chain of question. I think we have a couple left. One is question number 2. Could you please explain how the effects can have a negative impact, both on EBITDA and net debt?
No, net debt is not negative. So it's reducing debt. Okay. So because today, on the net debt, the point is I want to be clear on the net debt because I have already explained this before, but it's better to reinforce the fact. On the debt, so we have no impact, really no impact on debt because our debt is fully covered, is fully hedged.
So what we report on debt is related on so the level of exchange mainly related on the dollar. But so this is ranging around the strike price that we have covered through hedges. So having said that, today, at the level that we are experiencing the numbers that we are giving you in the Q1, we are at the level of the hedge. So the level of debt that we have today is, for some reasons, quite in line what is the level of the debt we have will repay at the end of the time. So that's it.
The ranging is only related on the level of dollars, but it's not impacting at all the level of the strike price where we have hedged almost all the exposures that we have in dollars.
Okay. Now the question number 3, sorry, can you tell us what returns are you seeing from RAS Investments, which are currently under construction, more or less than your targeted 12% EBITDA on CapEx?
Well, on the overall, we don't see any major change because of the same. So we have many parts, different parts in which we are working on. And clearly, so the overall impact stay around the level that we had in the plan. It's clear that in some part, so we are looking at different way to develop renewables. We are looking also at some hedging related to the portfolios that we have in specific areas that may give us the possibility to have an increase in returns, not increasing in a significant way the level of risk that we are taking in developing renewables.
Okay. I think we are approaching the last one and it's about the exposure the question number 6, the exposure of the group to the significant rise in CO2 power and gas prices. Can you remind us the rule of thumb exposure to prices and when would you expect any earnings benefit to start to show?
Well, so we are so it's clear that so in the way in which CO2 prices is triggering and increasing with the spot prices in the market. It's clear that having less and less exposure to thermal production, but having the markets already fixing the price based on thermal production, it's clear that the benefit is pricing until a new market design will come. That is exactly the way we are acting. So looking at markets that are setting that are still setting prices with thermal production. And supporting renewables with the levelized cost of energy, this is by far lower than this price set by the thermal generation with so high CO2 level price is an exceptional period in which you may do a high level of extra profit reducing your the paybacks of your plant.
And if you can do it, making the production to your customer base is the best way
Okay. I think this is the last question. I think we have answered to all of them. If something was not answered, it's completely my fault as we received many questions and some might have slipped out of my inbox. We will provide an answer offline immediately after the closure of this call.
Thank you, Alberto, for being with us, and thanks to all of the analysts and the investors that have been so, so participative to this call.
Thank you.
Thank you.
That concludes the conference for today. Thank you for participating. You may all disconnect.