Ladies and gentlemen, thank you for standing by, and welcome to the Enel nine-month 2020 results presentation. At this time, all participants are in a listen-only mode, and I must advise you the conference is being recorded. I would now like to hand you your first speaker today, Monica Girardi, Head of Investor Relations. Please go ahead.
Good evening, ladies and gentlemen. I'm Monica Girardi, Head of Group Investor Relations. A warm welcome to the nine-month 2020 results presentation, which will be hosted by our CFO, Alberto De Paoli. In the presentation, we will provide some highlights of the period, and Alberto will take you through the operational and financial performance for the group. Following the presentation, we will have the usual Q&A session. In line with what we have done recently, we ask those connected to the webcast to send questions only via email at investor.relations@enel.com. Before we start, let me remind you that media is listening to both the presentation and the Q&A session. Thank you, and now let me hand over to Alberto.
Thank you, Monica. Good evening, everybody. Now, let's start with the highlights of the period. I am on page number one. As you can see from the chart, at the end of September, net ordinary income is up by 9%, demonstrating the resiliency of our business model even against sudden disruptions. The distressed environment experienced in the first six months of the year has extended over the third quarter, where some recovery on the demand side came together with further weaknesses on currencies. I will detail this trend over the next slides. Despite this unprecedented scenario, the group has recorded a solid performance. Our strategy was not to put on hold and continue to deliver, and we made significant progresses on decarbonization. Since the beginning of the year, we commissioned 1.7 GW of new renewable capacity, reaching around 4 GW of renewable-built capacity over the last 12 months.
Simplification of the group structure accelerated further with the completion of the second share swap in Enel Américas, through which we reached 65% shareholding in the company, as well as with the launch of the process aimed at merging EGP LatAm assets in Enel Américas perimeter. We confirmed 2020 targets, which I remind you have been set at around EUR 18 billion for EBITDA and in the range of EUR 5.2 billion for 2020 for net ordinary income, which therefore will grow mid-high single digit versus 2019. Let's now start by analyzing the evolution of the scenario in the third quarter. I am on page number two. As commented during previous releases, this unprecedented global emergency translated into a strong deterioration of market context, impacting negatively demand and triggering a severe devaluation of currencies. During the third quarter, FX still represented the main headwind to our results.
LatAm currencies down on average 20% in the quarter alone, with Brazilian real as one of the most hit. Electricity demand has shown a progressive recovery across all the countries of presence, even if it still shows negative trends compared to the previous year. I will show you in the next slide the impact on business headwinds, and now we are on page number three. The group's EBITDA was mainly affected by the following negative impacts: EUR 650 million from the devaluation of currencies and hyperinflation in Argentina; EUR 530 million associated with COVID-19 dynamics related to the sharp contraction in volumes for EUR 440 million, impacting retail activities worldwide and networks in LatAm. Discussion here with the regulator ongoing to find offsetting mechanism to this situation. Then other dynamics mainly associated with darning processes impacting for around EUR 90 million.
Net of both COVID-19 and FX impact that is derived by the COVID impacts, EBITDA would have been up by 8% year-on-year. Moving down the profit and loss, we recorded a negative impact on DNA, worth around EUR 180 million, associated with the increase in bad debt provision. On the group ordinary net income, the COVID-19 crisis translated into around a burden of EUR 300 million, topped by a negative FX impact of around EUR 130 million. Net of both COVID-19 impact and FX, net income would have been up by around 23%. Notwithstanding the extraordinary environment, we are fueling our growth ambitions, and I will show you in the next slide, in slide number four, things related to the deployment of CapEx. As you can see in the nine-month, CapEx stood at EUR 6.6 billion in line with previous year.
Net of currency devaluation and inflation, CapEx would have increased by 7% in real terms, signaling the commitment and the capability of the company to deploy investments delivering on industrial targets. Around 90% of total CapEx was devoted to renewables and infrastructure and networks in the accelerated effort to digitalize grids and to decarbonize our generation fleet. From a geographical perspective, gross CapEx was deployed mainly in South America, Italy, and North America. Development CapEx representing more than 60% of total investments reached EUR 4 billion, slightly higher than last year. Out of the total amount, around 70% was allocated to renewables, mainly in North America and Latin America, and 25% has been invested in infrastructure and networks. Looking at the 2022 period, around 85% of asset development CapEx is already addressed, providing high visibility on industrial targets for the planned period.
Focusing on the progress we made in renewable growth, now we move to Enel Green Power on slide number five. In the first nine months of the year, as said, we have built around 1.7 GW of new renewable capacity, with 900 added only in the third quarter of 2020, reaching around 4.1 GW of renewable built over the last 12 months and confirming the capability of the group to pursue the growth trajectory set even in difficult contexts. Renewable production increased by 6% versus last year, while production from conventional generation sources decreased by almost 30% as a consequence of the coal phase-out process we are putting in place. Worth to remember that following a sharp acceleration in coal clusters, the group coal capacity is now below 10 GW for the first time in Enel history.
As a consequence of the shift toward renewables, the share of emissions-free production increased to 65%, 10 percentage points higher than the same period of last year. Finally, the future development of new renewable capacity is supported by a vast pipeline of around 110 GW. In the third quarter, we added 7 GW to the mature phase, reaching 51 GW at the end of the nine months. Now, before going into details on the financial performance, let me briefly summarize our progress on group simplification on slide number six. In September 2020, the Board of Directors of Enel Américas announced the launch of a related party transaction for the merger of Enel Green Power assets in Latin America in Enel Américas. The company has also appointed the independent appraisers, which by mid-November will present the third-party assessment of the fair value of Enel Green Power assets.
The merger, I recall you, is subject to the elimination of the 65% shareholding limit established by the bylaws, which will be voted together with the whole transaction during the EGM expected to be held at the end of December. Thanks to this merger, Enel Américas' structure will be aligned to the rest of the other subsidiaries of the group. This will allow to maximize synergies and to reduce operational and financial risks. According to calendar, if approved by the EGM called by the Americas, the transaction should be completed by the second quarter 2021. Let's now have a look at the financials of the first nine months of the year, and we are on slide number eight. EBITDA, as said, stood at EUR 13.1 billion in line versus previous year. Group net ordinary income increased to EUR 3.6 billion, 9% higher versus the same period of last year.
FFO reached EUR 6.6 billion, down 18% versus last year. The delta versus the previous year is still negative, but FFO has shown recovery signs compared to first half, mainly thanks to improvements in working capital dynamics in line with what anticipated during the first half release. Finally, group net debt stood at EUR 49 billion, increasing by 8% versus year-end 2019. Before going through the details of the financial performance of each division, let me comment group EBITDA on slide number nine. As already commented, EBITDA at EUR 13.1 billion shows a solid improvement of the underlying operating performance despite the adverse scenario. Excluding the impact of FX devaluation and hyperinflation in LatAm, EBITDA would have increased by 4%. Resiliency of our European networks has been supported by solid regulatory frameworks, while in LatAm, volumes dynamics represented a hit in operating performance.
On generation and retail, the new capacity deployed has driven the improvement in the operating performance, while the integrated management of margins continued to project the economic results against the market fluctuations. Now we will move into a deeper analysis on the financial performance. Now, on slide number 10, we will start from the global power generation. Here in the slide, we take a look at the performance of the global power generation division, while in the following two slides, we will go more in detail through the performance of Enel Green Power and conventional generation. Global power generation ordinary EBITDA stood at EUR 5.1 billion, 10% higher versus the same period of the last year. Excluding negative impact of FX devaluation in LatAm, performance was up by 17%. The unitary gross margin increased by 10% in the period.
This improved profitability comes from a higher share of renewables in the mix compared to the year ago. Worth to remember that last year's performance included around EUR 100 million capital gain associated with the full consolidation of our North American asset, as well as EUR 160 million positive contribution associated with the early termination of a PPA, a contract in Chile. Furthermore, as already commented during the Q1 and first half result calls, the period has been positively impacted by the provision reversal in Spain for around EUR 170 million. Now, for the next two slides, we focus on Enel Green Power and conventional generation, starting from page number 11 with Enel Green Power. We reported an ordinary EBITDA of EUR 3.4 billion, or 3% higher versus last year.
As mentioned in the previous slide, in 2019, we recorded a positive capital gain for a total amount of EUR 180 million for both the North America capital gain and the early termination of PPA in Chile. Net of these non-recurring effects recorded in 2019 and the FX impact, underlying EBITDA would have increased by 16%. This operating performance was mainly impacted by the following dynamics: a positive impact of around EUR 250 million coming from the additional capacity installed in 2019, an increase of EUR 160 million coming from an improving performance of hydro power plants, roughly EUR 75 million for higher prices fully hedged for 2020 in 2019, and EUR 20 million of efficiencies. The FX impact this year counts for EUR 230 million of negative impact. Moving now to slide number 12, we discuss about conventional generation and trading results.
Ordinary EBITDA increased 27% and came at EUR 1.7 billion. This positive performance has been led by trading activities, which are up by more than EUR 400 million. The main drivers of the improvement are the following: the short position in Spain that impacted positively for EUR 150 million, the gas portfolio management that worth around EUR 170 million, and then positive contribution for EUR 80 million associated with the better performance of trading activities, mainly in Italy. On conventional generation, we remind you that the period has been positively impacted by the provision reversal in Spain for around EUR 170 million, while last year the ordinary EBITDA included the positive contribution associated with the early termination of a PPA in Chile for around EUR 80 million. Net of these one-off items, the underlying operational performance decreased by 15%, or around EUR 190 million.
This is mainly due to around EUR 150 million associated with lower volumes and regulation in the highlands in the Spain highlands, and roughly EUR 90 million of FX depreciation in Latin America. We got positive items in terms of higher efficiencies in Italy and Spain for EUR 60 million and other positive impact because of our hedging strategy for prices mainly in Italy. Now, moving on page number 13, let's take a look on infrastructure and network results. Here, ordinary EBITDA stood at EUR 5.8 billion, decreasing 6% versus last year. The European countries' EBITDA increased by 4% versus last year, demonstrating once again the resiliency of our European networks, which have been supported by solid regulatory frameworks. In Latin America, the persisting contraction in volumes demanded a negative impact on our operating performance of around EUR 140 million, mainly in Brazil.
In October, there has been a recovery in the consumption, which has bounced back almost to the pre-crisis level on a year-on-year basis, mainly in Chile and Brazil. As said in the first half result call, discussions with regulators are ongoing, and we expect further to what has already been done to offset financial impact, other action to be taken to offset the economical impact. In addition to the volumes impact, the main moving parts of the period have been the following: around EUR 180 million positive impact related to the investment in digitization and improved service quality, mainly in Italy; a currency devaluation that impacted more than EUR 300 million of business; and CPI on OpEx that had a negative impact of roughly EUR 60 million. As commented in the previous result releases, the reversal of the provision in Spain impacted the ordinary EBITDA for around EUR 180 million.
Last year, we had EUR 150 million positive impact coming from the regulatory settlement we made in Argentina. Now, moving on retail on slide number 14. As you can see from numbers, despite the challenging environment, retail operations continue to work properly, adding 400,000 new customers in the liberalized market over the last 12 months. EBITDA declined by 4% year-on-year due to a sudden decline into volumes, particularly into the B2B segment. If we look closely at the free and regulated markets, free market EBITDA declined of around EUR 120 million, or 6%, and this is mainly attributable to a temporary long position driven by a sharp contraction in volume in Italy and Spain of 5% and 11%, respectively. In Italy, EBITDA declined 4%, or around EUR 60 million.
Average unitary margins for both B2B and B2C segments were broadly unchanged, so the only relevant impact was on the long position to be sold to the market. In Spain, EBITDA declined by 18% or more than EUR 90 million. Romania had a different trend. Retail EBITDA increased by EUR 35 million on better energy margins. The regulated market increased 2% or EUR 10 million, and we are still progressing on efficiencies in this field, and we recorded efficiencies in excess of EUR 70 million, both in free and regulated market, mainly in Italy. Now, before going through the financial management section, let me comment on our progress in efficiencies on page 15. Looking at the chart, you see that over the period, operating expenses decreased by 7% or more than EUR 400 million, mainly driven by the efficiencies recorded in the period and FX effect.
Efficiencies, which accounted for almost EUR 100 million, have been registered mainly in retail and conventional generation, and we are well on track to reach our target of EUR 1.2 billion cumulated OpEx savings in the 2020-2022 period. Finally, we recall that, as already commented during the previous result releases, the current nominal level of OpEx, which amounts to EUR 5.4 billion, has been positively impacted also by the provision release in Spain for around EUR 350 million. Now, we have gone through business drivers, and now we can move to the financial management section starting on slide number 16, where, as said, ordinary group net income came in at EUR 3.6 billion or + 9%. In the next slide, we will show in detail the main items that have supported the growth in earnings during the first nine months of the year. Now we are on page 17.
The rise in group net ordinary income is derived to lower DNA and financial expenses, better results from equity investments, and the reduction in minorities interest, which more than offset and higher tax rates. DNA slightly reduced versus last year as a consequence of lower depreciations in Italy, Iberia, and Chile, thanks to coal impairment made in 2019, which more than offset the increase in bad debt accruals related to COVID-19 scenario and investments deployed. The reduction in financial expenses is in line with our efforts to decrease the cost of debt, which declined by around 40 basis points versus the end of 2019. Taxes increased by around EUR 130 million, mainly due to an increase in earning before taxes, and because in 2019, we recognized some deferred tax assets in the U.S., Argentina, and Chile.
Minorities decreased by 17%, reflecting operating dynamics, mainly in Italy and Latin America, and an increase in Enel Américas and Enel Chile stakes. Moving now to cash flow, and I am on page number 18. FFO stands at EUR 6.6 billion, partially recovering the negative effect related to COVID-19. Dynamics recorded in the first half of 2020. In more detail, the dynamic underlying the FFO compared to the previous year can be explained as follows. EBITDA almost in line with previous year, considering also the provision reversal in Spain, which has no cash impact. Change in provision increased by around EUR 300 million, mainly due to the higher bad debt accruals to COVID-19, a negative EUR 1.1 billion delta working capital versus previous year, mainly deriving from lockdowns in different countries, as already commented during the previous results call.
Lower financial charges paid, mainly as a consequence of lower cost of debt. On working CapEx dynamics, it is worth to highlight that out of the EUR 2 billion extraordinary impact we have shown during the first half, EUR 700 million have been already recovered. We will continue to focus on improving the working capital, monitoring and handling any unforeseen event that can arise from the second wave of COVID-19. At the end of the nine months, investment made were fully covered by the generation of operating cash in spite of the adverse scenario. Let's now take a look on the net debt on slide number 19. Net debt, as said, stood at EUR 49 billion, around EUR 1.5 billion lower than the level of June. Changes are driven by neutral free cash flow, as commented, and dividends paid for EUR 4.6 billion.
Cash outflows related to the increase in the share of Enel Américas and Enel Chile through the equity swap, new hybrid bond emission accounted as equity. The valuation of local currencies against the euro had a positive impact of around EUR 1.7 billion, bringing debt at strike price level. We remind you that we have around EUR 3.9 billion hybrids still fully accounted as debt, and we have recently launched a consent solicitation for the holders of three euro-denominated hybrids amounting to EUR 1.8 billion in order to align the terms and conditions of these bonds with those of perpetual hybrid bonds issued last September and to account them as equity when the process will be finished. Now, move to page 20 for closing remarks. As just pointed out, we have been experiencing an extreme and unforeseeable scenario with headwinds ranging from micro variables to operating dynamics.
Despite this very challenging environment, we have been able to deliver a solid operating performance with a 9% growth in net ordinary income, demonstrating that our integrated business model is protecting results against sudden disruption. During the third quarter, we observed signs of recovery, particularly on volumes and prices, as expected, new renewable additions accelerated, and last quarter deployment plans will support the achievement of the 3,000 MW target for the full year. The completion of the merger between Enel Green Power LatAm and Enel Américas will unlock new sources of value while reducing group's minorities. Our dividend floor grants a high single-digit year-on-year growth and an attractive 5% dividend yield. Thank you for your attention, and let's now open the Q&A session. Monica, the floor is yours.
Okay, great.
Thank you, Alberto, and I think we can now move to the Q&A session starting from the questions we collected till now. I want to thank the following banks for having sent questions over, namely Equitas, Barclays, Soc Gén, Berenberg, Credit Suisse, Kepler, Santander, Morgan Stanley, Akros, Mediobanca, Merrill Lynch, Goldman Sachs, and Citigroup. Let's kick off with a question on guidance. Full year guidance has been confirmed following the reset in the six-month presentation. Can you comment on the underlying components? Any further risks from COVID and new lockdowns? Do you expect further weakening of currencies?
For the visibility that we have for the time being, we can confirm the guidance for 2020, even in light of the fact that we are experiencing weaker currencies and also in some parts of the world, the worsening of the COVID-19 situation. We are linked to operating growth and efficiencies that are the key items for reaching the 2020 guidelines. It is clear that we are closely monitoring the evolution of the second wave of the COVID-19 across all our countries of presence. We are still, like we have done since the beginning, working to ensure business continuity of the operation and the safety of our people and contractors.
Okay. Another question, I guess, on the figures that we are expecting, looking beyond, starting from [eBay's] 2020 full year figure, what can we expect for 2021 and 2022 for both EBITDA and net income?
When we reset the 2020 targets during the first half, this was driven by the assumptions of no recovery of the currency devaluation vis-à-vis the scenario embedded into those targets.
Now, over the third quarter, we have seen further weakness of currencies that are deviating even more from the scenario of the 2020 business plan. When it comes to 2021-2022, we are working on an extensive effort to offset such impact through managerial action. I think the next 24th of November will be the place in which we will present our new plan and also to make you ready to appreciate how the different moving parts of our plan will play out in the new 2021 and 2022 figures.
Okay. Question on net debt. Net debt is down from previous quarter and is already in the target range for the full year. What are the main drivers for this evolution? Do you believe there is space to close the year in the low end of the range or even better?
Net debt reduction in the quarter is mainly attributable to the improvement in cash generation. This is the recovering effort we said we were working on for the second part of the year, mainly at reducing the working capital level, restarting the cash management activity. This brought the free cash flow to be neutral. The second important impact was the further devaluation of currencies that reduced the debt. I want to stress the fact that this reduction brought the level of debt at the strike price. It is exactly a level in which we do not have any FX impact because it is set at the strike price. It is clear that also we think the net debt will stay in the range announced. Any other moving part on debt, we will discuss about it during the capital market day presentation.
Okay. There are a set of questions around working capital dynamics. First question is about the extraordinary components that we booked into the working capital and how they changed versus the six months.
As commented, working capital is still affected by missed and delayed collection associated with lockdown measures. We have already had the gap in working capital that we showed in the first half, thanks to recovery actions that we activated immediately. We moved customers to digital channels. We asked for regulatory intervention and other measures. Now, with the visibility we have today, thanks to all these measures, we expect to recover part of the remaining gap within the year.
Another question on working capital. What is the level of working capital we should assume for year-end? How confident you are on the recovery of the extraordinary components?
As we said, we are on track on what we said in the first half. We see another EUR 700 million of extraordinary working capital to be reabsorbed by the year-end. As said, the rest will be cashed in early 2021. All in all, at the year-end, we expect to have working capital in the range of EUR 500 million-EUR 1 billion. That is the part that we are going to reabsorb next year.
One question on COVID impact. Can you provide an update for the nine months on the breakdown of COVID impact on each business segment?
As said, COVID impact is estimated in the range of EUR 530 million. As said, EUR 440 million is coming from the contraction in volumes, and this is the part that impacted retail activities worldwide and networks in LatAm. We have other dynamics that are associated with dumping processes with an impact of EUR 90 million. When it comes to the business lines, the vast majority of impact, as said, is coming from distribution and retail. Distribution is 100% in LatAm because the dumping and losses and also the volumes are all things that are affecting the LatAm distributions. Retail is more spread worldwide, but the main focus is clearly where we have the highest level of volumes, that is Italy and Spain, in which having this long temporary position is the main impacted country, are the main impacted countries.
A recurring question, Open Fiber, any update? Could the transaction be finalized by year-end?
Right now, there are no particular updates on Open Fiber. I can confirm that while we are still focused on making up the industrial development of the company, we are still working to understand and to discuss the details of the offer received by my quarter.
Okay. A hot topic, merger of BGP LatAm and Enel Américas, which is the level of shareholding you expect to have after the merger? I add another last second question, if this is a step towards full ownership.
For the time being, the level of shareholding after the merger is not really relevant because I think that because of the way the deal is a merger, the differences in valuation will drive a very, very short range in the shareholding after the merge. I think that now the relevant part of the process is that the final valuation are expected in days.
The very point is that all the deal is based on the fact that this 65% of shareholding limitation will be removed by the EGM. This is not something that will lead to 100% shareholding. It is clear that we work easily with listed companies for our business, also with our integrated business. It is something that we drive in Spain, that we drive in Chile. It is not a matter to have a holding of 100%. It is a matter to have a complete integrated business with a company that does not have any limitation in the shareholding stake because any limitation is something that puts some obstacles and hurdles on the way a company may be managed and also may create value in the market.
Another hot topic, hydrogen. EGP Chile and AME announced a new green hydrogen pilot plant. Do you have other projects in mind?
Development opportunities in Chile and also in Spain, in Italy, in the United States. We are looking at all the opportunities, and we are trying to find the best possible combination of certain variables that include off-take availability, water feed, energy prices level to try to find a way to make this kind of business accretive for our renewable development and also useful for the decarbonization effort of the world.
Okay. A set of questions around Brazil. The first one is about the COVID account. Following the first installment, are the monthly payments of the COVID account being paid still expected to be finalized by December?
Yes. When Brazil will get up to EUR 500 million of COVID account, we have just received approximately 80% of the total amount, while the difference will be paid up to December on monthly installments .
Okay. Second question around Brazil. Can you provide more color on the ongoing discussion with the regulator on neutralization of economic impacts? How confident you are about a positive solution?
Expectation is to recover entirely the decrease in demand. It is on the other side also to have a recovery of the downside associated with performance on losses and bad debt. Because these are all stuff that arose because of drop in demand or because dumping activities were banned. Because it was the right thing to do, but was banned. Now the increase in losses is something that we are experiencing on our results. We believe that Enel will respect the concession agreements and that the methodology proposed at the public hearing will be improved in order to rebalance the economic situation for the distributors that faced the impact of restriction as said and imposed by the government, and also the freeze to power cut. I think that now discussions are in place, but visible improvements will be addressed in the next weeks.
In case there is no agreement, an analyst is asking if you can break down the potential economic impact.
I think economic impacts can be split in three main impacts. One is the lower demand volumes. The economic impact forecasted for 2020 due to lower demand impact is around EUR 200 million. We are working with the regulator to recover in full or a portion of this loss.
The second impact is from bad debt and working capital. Increasing bad debt is associated with the freeze of dumping activity, is worth around EUR 30 million. We expect to recover this part in the first half of 2021. The negative impact on working capital coming from worsening performance in credit collection, as I remember, is already completely offset by the Quinta COVID measures. Also, the overcontracted power volumes that today is roughly 6 TWh , it carries no economic and financial impact because roughly 60% is covered by the current regulatory framework, and the remaining part will be covered by the Quinta COVID. The only impact on the table are volumes impact, bad debt impact, and losses impact. These are the impacts that will have to be covered.
Okay. You have shown some pickup in demand. Can you give us an update on the main operating parameters for your LatAm grids?
The main operating parameters of a grid are losses on one side and quality on the other one. On losses, performance has been temporarily affected by the stop of operating commercial activities such as inspections, aimed at detecting frauds and meter reading. In this field, Argentina is the most affected with a worsening of roughly 4 percentage points of higher losses. Other LatAm countries are increasing losses of around 1%. On the other hand, thanks to our effort on investment for quality, the quality performance has significantly improved versus last year in almost all the countries in which we work, and in particular in Argentina, Colombia, and Brazil .
Okay. We completely jump on a different topic. An analyst is asking if there is any potential risk on dividend payments for 2020 or if we can change the minimum guaranteed for 2021 and 2022.
There is no risk at all on our dividend payment for 2020. Our policy is confirmed, and as said, we will be paying the highest between 70% payout and a minimum guaranteed dividend that is set at EUR 0.35 per share. With the minimum DPS, shareholders will be getting an increase in remuneration of around 7% versus previous year and a dividend yield in excess of 5%. As you know, last year we set also a minimum DPS for 2021 and 2022 of EUR 0.37 and EUR 0.40 respectively. We see no circumstances imposing a change.
Clear. We move now to a set of questions that are about our business. The first set of questions is about renewables. First question is the following. With 1.7 GW build to date, what is your expected final number for capacity commissioned in 2020? What is the updated number for megawatt moving from 2020 to 2021?
We confirm expectation to reach 3.2 GW of renewable additional capacity by the year end. We are going to move 800 MW of capacity in 2021 that we are going to complete in the first half of the year. This is the span of delay that we are suffering because of the COVID situation.
Okay. Question on pipeline. Can you provide more color on the 110 GW pipeline you mentioned in the presentation?
110 GW includes around 50 GW of what we call late-stage pipeline with a higher level of maturity and 60 GW of early-stage pipeline. If you look more closely on the 50 GW, projects are well distributed from a geographical standpoint. 30% is in Europe, 37% in LatAm, 18% in North America, and the remaining part in Asia and Africa and Oceania. From a technological point, it is well balanced. We have 52% of wind projects and 47% of solar projects.
Okay. Another recurring question. Given the appetite on renewables coming from several other players, could you consider some disposals to recycle capital?
Yes. We see the appetite of the market, and we think that it will grow even further because this will be driven by old players that are trying to gain back some of the time lost and others that need to steer their business model for survival. In the past, we have sold entirely or partially some assets to crystallize early on the value of our pipeline and to gain broader exposure by allocating capital on other opportunities. While we collect, we are still collecting an operational maintenance fees for the plant that we manage. This indirect business model has been instrumental in creating value and can be scaled up not only in renewables but also in other parts of our business in light of the opportunities that will be available further supported by our skills and critical know-how across the full value chain of the power business.
Okay. How 2020 has been so far for resource availability in line with expectations?
Hydro has been lower compared to historical trends in Italy, Chile, and Colombia. Now there are some recovery signs in Europe in the second part of the year. Wind resource has been lower than expectation, mainly in the U.S. and Spain so far. It is also a year in which we have some wind and hydro resources down versus expectations.
Okay. Another set of questions about our business. We move to conventional generation. You are now below 10 GW of coal installed capacity. When can we expect the next material step down?
We have already accelerated on the coal phase-out mainly in Italy and Chile. This will bring us to further reduce the coal capacity in 2022 well below the level expected in the official business plan. In a matter of days, we will present to you the updated coal phase-out plan during our capital market day.
Okay. How price dynamics have impacted your short position, I presume in the nine months?
Now we are observing a recovery of pool prices in the third quarter after this huge drop in pool prices. This recovery still managed to translate market movements into benefit because of the integrated management of our short position. This was about EUR 140 million during the nine months. For the remaining part of the year, we might expect that benefit to potentially stay depending on the evolution of the electricity prices.
Question around hedging prices. Any progress on hedging for 2021 and 2022? Any impact on price?
Forward says for 2021 stands around 85% in Italy and 96% for Spain, so it's almost hedged. These are up from 70% and 90% respectively in the first half. 2022 with 10%-26% for Italy and 43% for Spain. In these two countries in which this is an integrated naturally hedging between our generation and our retail activities, we do not see any major impact on the integrated margin that we are covering together, so the generation part and the retail part.
Okay. We move to networks. Besides the ongoing discussion in Brazil, is there any other regulatory discussion ongoing? Any potential risks?
I would say that regulatory authorities are responding proactively to the emergency in almost all the countries in which we work with different means. In some countries, there are the creation of special funds like the Quinta COVID, some liquidity facilities in order to provide financial resources for the regulatory intervention. Peru, for example, put an interest payment for the bill payments postponed. In some other parts, the limitation of our new investment has been removed. I think all the regulators are calling for new investments. I think that also the new discussion that will start for new regulatory periods will be affected by the needs of new investments on networking on the countries to recover the economical crisis. We think that there is a positive stance on the regulation on the grids and regulated business in general.
Okay. We move now to retail. Can you provide a breakdown of B2B and B2C for Italy and Spain and elaborate on the movement observed for first half?
In Italy, the power sold is down 5% versus previous year, where B2B segment is down 9% and B2C is up 7%. In Spain, volumes are down 11% year-on-year. 14% B2B is down, while B2C is almost flat. The vast majority of impacts in volumes is the contraction of the industrial activities associated with lockdown. We see that this is mainly concentrated in the lockdown period. We had -30% in April with a progressive consumption recovery observed in the following months. This decrease was only partially offset by the higher consumption in the residential segment. While the economic impact of this shift in volumes consumption is limited, as this segment, the B2B segment, runs on completely different marginality. The B2B marginality is by far lower than the residential marginality.
Okay. I think that with this final comment, you basically answer also the following question, which was about the margin for B2B and B2C in Italy and Spain. We can jump to the next, which is about demand. What do you expect in terms of demand for the last quarter of the year in Italy and Spain?
It is clear that we have to look carefully at the evolution of the second wave. What we have now in front of us is a demand that we see at -2% versus previous year. We continue to see a progressive normalization of consumption notwithstanding the spread of positives also in Italy and Spain. This is the trend. In the next days, we will see if new measures of lockdown will affect or not this progressing rise of power demand.
Okay. A few questions around financials. Financial expenses are down versus previous year. How should we think of this trend going forward?
We expect to close 2020 financial expenses on around EUR 2.1 billion and continuing the cost reduction trends thanks to also the actions we are implementing. Cash optimization action, positive impact of effective evaluation, lower level of interest, and increasing access to sustainable finance instruments market. Yes. We have already said in our business plan presentation that we are following a progressive trend in reduction of cost of debt. Going forward, we will stay stick on this reduction trend.
Okay. Question around hybrid bonds. Regarding the consent solicitation on hybrid bonds, what is the rationale of the transaction? Is the consent changing the equity credit or rating assigned by rating agencies?
With the consent we have just launched, we aim to align existing euro denominated hybrids to the one recently issued and achieve by that path equity accounting treatment. This is following the fact that there have been recent clarification around the tax treatment of perpetual obligation from the tax authority in Italy. In September, as a consequence of this, we have issued the first equity accounted perpetual hybrid bond. The new framework allows for the issuance of these perpetual instruments that will bring equity accounting to hybrid. The issuance of hybrid instruments is, as such, aligned with the majority of the hybrid issued in European corporates, which are in the majority of cases perpetual and equity accounted. It's clear that the concept is not expected to impact the rating of notes, nor the equity credit assigned by rating agencies. Only the accounting treatment under IFRS is changing.
Okay. Can you provide more color on the reduction of cash over the period?
The reduction of cash is a technical reduction. You remember that we ran at the end of the last year some pre-financing activities in phase of maturity of debt in 2021. Now we are realigning the level of cash at the normal level that we run, that is in the range of EUR 5.56 billion.
Okay. Now, we move to a set of questions that have just been dropped into our email box. Question number one is about, I'll try to be chronological, I'll try to go through a chronological order. First one is on demand in Brazil, which, as we elaborated, was much better in the third quarter. COVID, EBITDA impact seemed to get worse. I.e., demand impact on the presentation was EUR 530 million versus EUR 300 million in first half. Why did the negative earnings impact persist when demand got better? Do you expect an improvement in fourth quarter?
First of all, it's clear that because the impact of lockdown and the COVID is different from segment said before for Italy, it's also for Brazil. You have different impact when the concentration of industrial company is different. We have different networks. We have networks that are with very, very low level of business customers connected and other in which the impact of business customers is very high. It depends clearly on, so the average of the country is not useful to understand what is the single impact on our networks. That's the way because you can reconcile the two things. All in all, what we are experiencing is a better situation in Brazil going forward. Yes, we can expect improvement in the fourth quarter. If we will reach an agreement with the regulators, a restore of the situation in 2021.
The second question that hit our email inbox has been already answered during the previous questions. We have a question around reconciliation in the third quarter between reported numbers and ordinary numbers. The question is the following. In the third quarter, so the question number three. In the third quarter, there are some EUR 292 million of positive adjustment of EBITDA. Can you elaborate on what they are?
The main differences between ordinary and reported EBITDA are related to the decarbonization provision on personnel that we recognized in Iberia and the COVID-related extraordinary costs that have incurred in the period.
Okay. Really clear. I am just moving through the question four and five, which I think have been already addressed. Question number six is a question about, again, third quarter. Networks in Italy, why networks EBITDA, I presume in Italy, were so weak in the third quarter versus the first half 2020?
It depends only on the fact that the particular cost recognition in the regulation, what we call the Libera number 50, is something that is accounted not linearly along the years. This moving part makes some strange definition between one year and another if it was accounted in one year in a certain month and in the next year in a different month. In this case, it is exactly this. We accounted last year more on this regulatory item before this year. We accounted less in the quarter. It seems that you have this impact that is only nominal and not operational.
Okay. I think that basically what you just answered, you also covered question number eight, which was about the results in the Q3 for networks. Question number seven has already been addressed. Question number nine, can you remind us what is behind the improvement in results from equity investments? What was the contribution of Open Fiber in nine months 2020?
Last year, we had a recognition of the capital loss related to North America joint venture unbinding. This was the main change. On the other side, now, we have a worsening in the contribution of Open Fiber because in nine months 2020, it is -EUR 70 million versus -EUR 50 million that we had previous year. The vast majority is one-off, negative one-off we had last year of this joint venture unbinding.
Okay. Alberto, that was the last question that we received from our analysts. I think we can close the nine-month call. We can just say we see you in a couple of weeks for our CMD. Thank you all.
Thank you very much. Thank you. Stay safe and see you in 15 days.