Thank you, Monica. Good evening, everybody. Let's look at the highlights of the period. We are in chapter number two. Over the second quarter of the year, we have touched the peak of the crisis that is associated with COVID-19 across all the countries we operate in. You will see in the next slide how this context has evolved over the quarter and the extreme scenario that has materialized. Despite this stressed environment, the group recorded a solid performance. Net ordinary income is up 6% year-on-year, demonstrating the resiliency of our business model, even against sudden and deep disruptions. Our strategy was not put on hold, actually. Dynamics of the business that we consider as being long-term trends have accelerated. We've made significant progress on decarbonization. We've reconditioned 800 MW of renewable capacity, paving the way for a new record delivery for earlier installations in 2020.
We shut down 2.1 GW of coal and announced the accelerated closure of our coal plants in Chile, this is the last one, and one unit in Italy at the Civitavecchia Power Plant. Simplification of the group structure progressed as planned. At the beginning of July, we have reached a 65% shareholding in Enel Chile. We are well on track on the second share swap in Enel Américas, on which we will receive an update in the forthcoming weeks. In 2020, ordinary earnings will continue to underpin a mid to high single-digit growth versus last year. I want to highlight that this business model of ours is solid and sustainable. It is set to capture unprecedented opportunities that will come from energy transition worldwide, and it will translate into supported growth in future years. In light of the solidity of our company, we're maintaining our minimum dividend per share.
For this year, the minimum EPS is set at EUR 0.35 per share, which underpins a 7% growth compared to the dividend paid last year. Let's analyze now the evolution of the scenario in the second quarter. As said, we are now on chapter number three, the market and macro trends we observed during the first quarter deteriorated further in the second quarter, closely mirroring the dynamics of COVID-19. Foreign exchange represented the main headwind, with Latin American currencies that evolved significantly since the beginning of the year, on average 18% just in the second quarter alone. Brazilian real is one of the currencies that has weakened the most. At this point of the year, we don't expect any recovery in the FX rates and reduce current levels to protect the financial appearance. The financial rules here are based on the present FX rates.
Electricity demand went further down in the second quarter, with Italy and Spain making double-digit decreases, widening further the contraction of demand already observed in the previous quarter. Spot prices have shown a sharp contraction in the second quarter, with Spain and Italy the most affected. We expect this trend to normalize in the coming months, along with economies bouncing back from lockdowns and adjusting to a new normal. In July, we already see an improvement in demand in the European countries, as well as in Brazil and Peru and Latin America. Thanks to the integrated margin management, we have already locked in volumes in full for 2020 and sold forward the 2021 production at 70% in Italy and 90% in Spain, securing far higher prices than current levels are expressing. Foreign exchange was the only headwind we could not control.
Alberto will show related impact at every level, and more importantly, how this translated into net income impact. This extraordinary environment has put in motion several initiatives to accelerate the economic recovery both at national and supranational level. The European Green Deal has defined climate plans that stimulate the long-term data perspective. The EUR 1.1 trillion long-term budget, reinforced by the EUR 750 billion sources allocated through the Next Generation Funding, will address promptly the economic and social damage brought by COVID-19 in Europe and weaken sustainable recovery in the eurozone. The resources available could support the sector in achieving both short and long-term goals, thanks to stimulus and new investment waves in power infrastructures, bringing renovation, automotive, and industrials, a speed up in the process of fighting climate change and reaching net zero emission by 2050.
The Next Generation EU could be further a boost to support the green energy recovery and more firepower on green investment. Furthermore, at country level, Italy, Spain, and Brazil have already implemented different measures to assess financial distress deriving from the pandemia. In particular, in Latin America, we expect regulator to be constructive on the discussions regarding the measures to be taken to assess the impact on these institutional companies coming from a sudden drop in volumes. If we move now to slide number five, which covers investments, you see that CAPEX in the first half was equal to EUR 4.1 billion. This is in line with last year despite emergency situation. Net of currency devaluation and inflation, CAPEX would have increased by 5% year-on-year in real terms, signaling the commitment and the capability of the company to deploy investments for the delivery of investment targets.
Around 90% of total investment was devoted to renewables and infrastructure and networks, in the effort and the accelerated effort to digitalize grid and the capitalization of our generation fleet. From a geographical perspective, gross CAPEX was deployed mainly in Latin America, Italy, and North America. Development CAPEX stood at EUR 2.5 billion, representing about 60% of total investments, out of which around 75% was allocated to renewables, mainly North America and Latin America. Looking at the 2020-2022 period, more than 80% of asset development CAPEX is already addressed, providing high visibility on industrial targets for the period of the plan. If we focus on the decarbonization strategy, we can move to chapter number six, which covers global power generation. Out of the installed capacity of 83,000 MW, renewables account for 46,400 MW, corresponding to more than 55% of the total.
This time, we see the surpassing of thermal capacity, which is down by 6,600 MW versus previous year. Unsurprisingly, production from renewable sources, which at the end of 2019 overtook production from thermal generation for the first time in energy history, is up 4 terawatt-hours year-on-year, almost twice as much as the production from thermal generation. As a consequence of this significant shift in balance towards renewables, emission-free production is close to 70% of total production, up by 11 percentage points versus previous year. We can say that we have reached two years in advance the target of emission-free production quota we had set in our 2020-2022 business plan.
Looking more closely to the progress on the plan for renewables, we see that with around—this is now chapter number eight—with around 10 GW of capacity built and addressed, we have secured 70% of the 14.1 GW that we plan to add in the period 2022. It is worth to highlight that one year ago, we were at around 73% of the targeted addition for the 2019-2021 business plan, which, I remind you, entailed the deployment of 11.6 GW, almost 3 GW less than current target. What needs to happen is that we cover the remaining 4.2 GW, and these are covered more than three times by the portion of the mature pipeline with completion operation date by 2022. The mature pipeline is up by 4,000 MW versus Q1, and now stands at 44,000 MW.
This provides ample comfort on the delivery of the residual target and offers significant leeway to increase the level of commissioning. In light of the progress achieved on the delivery, as well as the size of our pipeline, we are in position to confirm our 14,100 MW commitment, and actually, we are certain that the renewable capacity that we will deploy by 2022 will exceed significantly this level. Actually, you can see from the slide that the gross pipeline is in excess of 100,000 MW. We have been working extensively on growing this pipeline to support future deployment targets. A larger diversified pipeline ensures a profitable growth, minimizing operating risks. If we go now to the thermal generation, you see on chapter number nine that we are accelerating further our coal phase-out.
In the first half of 2020, we have shut down 2,100 MW of capacity, bringing the group's total coal capacity below 10,000 MW for the first time ever. Production from coal stands at 6.1 TWh in 2020, down by a remarkable 72% from 22.1 TWh, which we produced in the first half of 2019. It is 6 now; it was 22 in 2019, first half. In terms of turnover, revenues from coal amount now to 2.6% of the total, which is half of what we had in June 2019. Over the past weeks, we have taken further steps ahead in our decoal process. Enel Generación Chile obtained the authorization to terminate the operation at Bocamina by December 2020. This is three years earlier than originally scheduled, as well as obtained the early closure of Bocamina II in May 2022 versus the original deadline of 2040, so 18 years earlier.
In Italy, the Ministry of Economic Development has given the green light for the early closure of Unit II of the Civitavecchia Power Plant, which it was expected to happen in January 2021. This progress solidifies our commitment to the decarbonization of our fleet by accelerating closure of around 1,000 of capacity ahead of plan, and leading to a total coal capacity installed in 2022 that will be more than half than the level that we had in 2019. Time to move to networks, chapter number ten. Volumes distributed at now 8% overall and across all countries of operation, with a degree strictly correlated with the timing and magnitude of the COVID-19 outbreak.
This operating parameter does not I repeat does not translate into an economic effect in Europe, as revenue cap regulatory frameworks, typically of European countries, are not sensitive to volume distributed, but it does affect Latin American countries. In Brazil, our biggest operation in Latin America, we reckon that the regulator acted promptly to ensure the financial sustainability of the sector, and we are currently engaged in discussion on how the economic effects also can be absorbed. Throughout the period, despite operating difficulties, our efforts for the digitalization of the grid remained unchanged, bringing the number of second-generation smart meters installed to 14.9 million, up year-on-year by an outstanding 48%. Out of the 74 million end users we have in our network perimeter, 60% are now fully digitized. As a result of the investment in quality, the SAIDI and SAIFI indexes have decreased by 10% and 7%, respectively.
A decrease of these indexes means an increase in quality of service. Let's now take a closer look at customers. This is chapter number 11. Customers' positioning continued to strengthen via a retail traditional operation, as well as on new services and infrastructures. Progress on customers will allow us to tap the value pool associated with the uptake in unitary consumption, which is expected to accelerate further in Europe on the back of the green recovery and electrification of the economy designed for the continent. Customers in the free market, now at 17.3 million, are up by 600,000, with an increase in the customer base in free markets concentrated in Italy. Energy sold in the free market is down by 9% due to the COVID-19 and lockdown measures in countries where we operate. Alberto will give you details later on the economic performance of the retail business.
Looking at Enel X, the division performed extremely well despite COVID-19 and recorded significant progress in the deployment of charging infrastructure, which is up 41% year-on-year, with almost 90,000 charging points installed. Extended its leadership on demand response with 6.1 GW of capacity offered globally. Battery storage increased by 36% during the year, reaching a capacity of around 110 MW. Fiber deployment reached 8.7 million households passed, up 45% year-on-year. I now hand over to Alberto for the analysis of the results. Alberto, up to you.
Thank you, Francesco. Good afternoon to you all. I am now on page 13, and now let's move on to the financial summary for the first half. As said, EBITDA stood at EUR 8.8 billion in line versus previous year. Group net ordinary income grew by 6% year-on-year, came in at EUR 2.4 billion.
This financial performance was achieved despite a strong devaluation of currencies and the impact of the pandemic of both volumes and bad debt that I will detail later. FFO reached EUR 2.1 billion, down 58% versus last year. The decrease is mainly attributable to movements in working capital due to COVID-19 crisis and some differences in timing versus previous year. Group net debt increased to EUR 50.4 billion. I will be back on this in a few slides. Before moving to the detailed analysis of the semester, let's take a look at what effects COVID-19 means in the semester for our financial results. I'm now on slide 14. As you can see, the group EBITDA was mainly affected by two negative impacts: EUR 370 million from the devaluation of currencies and EUR 300 million associated with a sharp contraction of volumes, impacting retail activities worldwide and networks in LatAm.
As you probably know, there is a discussion ongoing with regulators to find the way to offset mechanisms to this situation. Net of both COVID-19 and effects, EBITDA would have been up by around 8% year-on-year. In down, the profit and loss recorded a negative impact on D&A, worth EUR 130 million, driven by bad debt provisioning, accelerating in the second quarter, as foreseen. On the group's ordinary net income, the COVID-19 crisis translated into around a burden of EUR 200 million, topped up by a negative effect impact of around EUR 800 million, bringing the overall impact up in the range of EUR 300 million.
Notwithstanding these major headwinds, our integrated and sustainable business model outlook of its huge financial performance, and I am now on slide 15, as already commented, we reported EBITDA, ordinary EBITDA at EUR 8.8 billion, broadly best, showing a solid improvement of the underlying operating performance despite the adverse scenario. Resiliency of our European networks has been supported by solid regulatory frameworks, while in Lat Am, volume dynamics have impacted the operating performance, as well as we will see later in the presentation. We require a coordinated and decisive action to be taken by the Lat Am regulators in order to tackle the current emergency. On the generation and retail business, the integrated margin management has protected the economic results against market fluctuations. In the next slides, I will focus on the main global business line drivers. I am now on page 16.
Before talking about the single business line, let me comment around our progress in efficiencies. As you can see from the chart, in the third semester, operating expenses decreased by 7%, or more than EUR 300 million, mainly thanks to the efficiencies registered in the period. We recorded efficiencies for more than EUR 170 million, well balanced between the retail, conventional generation, and networks, thanks to an acceleration of the efficiency plan. We are now well on track to reach our target of EUR 1.2 billion cumulated in the 2020-2022 plan. Finally, we recall that, as already commented during the first quarter result call, the current level of OPEX, which amounts to EUR 3.6 billion, has been positively impacted also by the provision release in Spain for EUR 356 million. We will now go through the details of the operating and financial performance for the semester.
We are now on page 17, where we take a look at the performance of the global power generation business line, while in the following two slides, we will go more in detail to the performance of renewable power and the conventional generation. The ordinary EBITDA of the global power generation increased by 9% and reached EUR 3.4 billion. Excluding the impact of FX evaluation in Lat Am, performance was up by 15% versus the previous year. The improved profitability of global power generation with a higher share of renewables is highlighted by the 10% increase in unitary margins. Worth to remember that last year, performance included around EUR 100 million capital gain associated with the full consolidation of our North American assets, as well as EUR 160 million positive contribution associated with the early termination of a PPA contract in Chile, as already highlighted during the first quarter call.
This year, in this year, we have the results have been positively impacted by a provision reversal in Spain of around EUR 170 million. Last year, EUR 270 million off, one off this year, 170, 100 less. In the next two slides, dedicated to energy and power and conventional generation, we can analyze the main components of the performance, and now we can move on page 18. For renewables, ordinary EBITDA came in at EUR 2.3 billion, 1% increase versus last year. Net of negative effect impact, EBITDA would have increased by 7%. As mentioned in the previous slide, in the first half of 2019, we recorded a net capital gain and a net determination of the PPA contract in Chile for a total amount of EUR 180 million. No impact, one-off impact has been registered this year.
The operating performance was mainly impacted by the following dynamics: EUR 100 million coming from the additional capacity installed in 2019, EUR 150 million of increase from the positive contribution of hydro plants performance, mainly in Italy and Colombia, EUR 70 million of increase as a result of higher prices fully hedged, driven mainly by Italy and Latin America, and EUR 20 million coming from efficiencies. The overall impact of the effect evaluation of LatAm currencies is in the range of EUR 130 million. Now we can move to the conventional generation, and I am on page 19, where you can see that ordinary EBITDA increased by 32% and came in at EUR 1.1 billion.
As already said, the semester was positively impacted by the provision reversal in Spain that accounts for EUR 170 million for this specific business, for the conventional generation business, while last year, the ordinary EBITDA included the positive contribution associated with the early termination of a PPA contract in Chile for around EUR 80 million. Net of these items, the underlying operating performance has recorded an improvement of 23% year-on-year, or around EUR 170 million. This is mainly due to EUR 130 million as a positive result coming from the group's short position, plus EUR 60 million resulting from higher prices fully hedged, mainly in Italy, around EUR 55 million coming from efficiencies made in Italy and Spain. The effect depreciation impacted by around EUR 60 million of decrease in this business. Moving now on page 20, we can have a look on the infrastructure network.
Here, ordinary EBITDA came in at EUR 3.8 billion, almost flat year-on-year. Net of the EUR 170 million impact on currencies evaluation, EBITDA would have increased by 3%. Reversal provision in Spain impacted the ordinary EBITDA for around EUR 180 million, while last year, EBITDA was positively impacted by the regulatory settlement in Argentina for around EUR 200 million. Also here, the net effect of the one-off 2019 and 2020 is almost the same. As a result, the underlying operating performance has been broadly stable, demonstrating the resiliency of the business, particularly in the European countries. In Latin America, the business performance was impacted negatively for around EUR 80 million, mainly in Brazil, by the 7% drop in volumes of electricity distributed.
As said before, discussions with regulators are ongoing, and we expect further to what has already been done to offset the financial impact, other actions to be taken to offset the economic impact. In addition to the volume impact, the main moving parts of the period have been the following. We added EUR 100 million related to the investment in digitalization and improved service quality. We added EUR 40 million for efficiencies. We got the tariff indexation in Latin America for EUR 80 million that has partially compensated the decrease in volumes. The currency devaluation impacted negatively for around EUR 220 million. Lastly, on page 21, I'm on the retail side. As you can see, EBITDA evolution reflects a really challenging environment, which has seen a drastic shift in energy customer base consumption.
That is pending dates at the end of a period that we consider the worst of the year being affected by severe lockdowns, in particular in Italy and Spain. Retail operations continue to work properly, and while in Spain, the customer base remains stable. In Italy, we added 100,000 new customers in the liberalized market. Additionally, around EUR 70 million cost reductions have been produced both in free and regulated markets, out of which EUR 40 million in Italy. Looking closely at the free and regulated market, the free market EBITDA declined by around EUR 70 million, or 5% year-on-year. The decline is mainly attributable to the following effects. In Italy, EBITDA declined 7%, or around EUR 70 million, due to a temporary long position driven by a sharp contraction in volumes led by B2B customers and also lower gas consumption, mainly as a consequence of mild weather.
The average unitary margin for both B2B and B2C markets were broadly unchanged versus last year. In Spain, EBITDA declined by 6%, or around EUR 20 million, on the same temporary long position dynamics observed for Italy, driven by a decline in the electricity sold. In Romania, retail EBITDA increased by more than EUR 20 million on better energy margins. Regulated market EBITDA decreased overall by 1.5%, or EUR 10 million. Now that we have gone through business drivers, we can move to the financial section. I'm on page 22, where you can see that ordinary group net income came in at EUR 2.4 billion, or +6% versus last year, mainly thanks to lower financial expenses, a better result from equity investments, and the reduction in minority interest, which more than offset the increase in D&A and higher tax rates.
In particular, D&A increased by around EUR 130 million, mainly referred to the higher level of bad debt accruals related to the COVID-19 scenario, for which discussions with regulators and managerial actions are ongoing to compensate the impact. The decrease in financial expenses reflects the continuous decrease of the cost of debt, which declined by around 30 basis points versus the end of 2019, with now an average cost of debt at 3.8%. Results from equity investment stood at EUR 35 million, while taxes increased by around EUR 165 million versus last year, mainly due to EUR 35 million for higher earnings before taxes and others for recognition in 2019 of the federal tax in the U.S. and in Argentina. Also on the cost in 2019, we booked some positive one-off items, such as the fiscal incentives on intellectual property in Italy.
Minorities decreased by 18%, reflecting operating dynamics mainly in Spain and Latin America, and an increase in energy and energy estate, followed by our share swap activity. Now moving to page 23, we can have a look on the cash flow. As said before, FFO spent EUR 2.1 billion, strongly impacted by the COVID scenario, which reached its peak during the second quarter of the year. In more detail, the dynamics underlying the FFO compared to the previous year can be explained as follows. EBITDA came in in line with 2019, considering also that the provision reversal in Spain has no cash impact. Change in provision increased by around EUR 400 million, mainly attributable to increasing bad debt for COVID dynamics already commented and the resolution number 50 in Italy.
Working capital was impacted for around EUR 2 billion by the lockdowns in different countries, as already anticipated during the first quarter result of the presentation. Payments of taxes last year had been moved to July, so this is the difference in taxes. This is only a timing difference. Out of the EUR 2 billion extraordinary impact, we expect to recover around EUR 1.2 billion in the second half of the year, on top of the usual working capital recovery as a consequence of the return to a stabilized situation worldwide and to the reabsorption of the CapEx curve, leading to a EUR 2.5 billion FFO recovery from working capital management in the second half. Worth to mention that Enel in Brazil has already approved the measure that will support the reabsorption of around EUR 500 million by the year-end.
Negative free cash flow is a consequence of the dynamics mentioned above, which we expect to partially recover in the second half of the year, bringing our cash generation recovered investments. Now let's move to take a look at net debt on slide 24. Net debt stood at EUR 60.4 billion. Changes are driven by an increase of EUR 200 million related to new leasing on IFRS 16, the negative free cash flow impact of EUR 2.1 billion already commented, and dividends already paid for EUR 2.6 billion, and cash outflows related to the further increase in the share of Enel Américas that have been achieved through the equity swap, and then we recorded the EUR 700 million positive FFO impact from the valuation of local currencies against the euro. It's worth to highlight that net debt at strike price of hedging is EUR 500 million lower.
We have already around EUR 4.5 billion of hybrid still fully accounted as debt. In Brazil, we will shortly receive EUR 350 million from the financial credit program for the distribution companies. Our gross debt increased by around EUR 2 billion as a result of the evolution of the debt, which has increased by around EUR 5.2 billion, and the reduction of cash deriving from the liability management activities performed at the end of 2019 to finance 2020, which helped us also in reducing cost of debt by 30 basis points compared to the end of 2019. In the following slide, you will appreciate our strong liquidity position and credit metrics. As you can see, our total liquidity as of the end of June stood at EUR 26.5 billion, of which EUR 5.9 billion in cash on hand and the remaining EUR 20.6 billion in available committed credit line.
This level of liquidity covers 1.5 times the debt maturing by 2023, amounting to EUR 18 billion, net of short-term debt that is routinely rolled over. Our credit metrics show a stable level of leverage, notwithstanding the extremely adverse impact on cash dynamics derived from COVID-19, with the net debt EBITDA ratio 2.8 in the last 12 months. The solidity of our credit metrics is further testified by current rating levels and outputs expressed by rating agencies, which acknowledge the sustainability of our credit metrics even in the current distressed scenario. Let me conclude this part of the presentation by reviewing through our new financial targets for the year that you can see shown in the slide. Over the course of the presentation, we have commented in detail the main factors that have come into play in the past months.
All these variables contributed to the creation of the extraordinary cycle practice we are operating in and that will remain with us for the foreseeable future. Looking ahead, we are extremely confident in the long-term performance of the group, as the solidity of our business model provides itself once again, showing resiliency against turbulences and in extreme scenarios. There is an ongoing extensive effort to offset the impact of these prices through discussions with local authorities and regulators, as well as through managerial actions. Not all factors can be offset, with FX being an exogenous variable and net debt dynamics associated with broader economic conditions and regulatory intervention. We do not expect a recovery of currencies by year-end, and we must reflect this new scenario into our 2020 guidance.
Based on the updated currency projections, the deep dive is expected to come in at around EUR 18 billion, while net income is expected to be in the range of EUR 5.2 billion for 2020. Net debt starting from EUR 50 billion, we have just commented, is projected to fall in the EUR 48-49 billion range, depending mainly on the completion of articles for the management opportunities that we are exploring. Shareholder remuneration backed by the EUR 0.35 per share minimum guarantee dividend set for 2020 will achieve a mid-high single digit year-on-year growth comprised in the range between 7% and 9%. I finish here, Francesco. I hand over to you for closing remarks.
Thank you, Alberto. As you have all heard, we've been experiencing an extreme, quite unforeseeable scenario with headwinds ranging from all sides, from macro variables to operating dynamics.
I should say that if there was to be a proof of the resilience and validity of our integrated business model, this is the proof. Despite this very challenging environment, we have been able to deliver a solid operating performance on the back of this very resilient business model that we're talking about, coupled with our efforts to ensure business continuity across all segments and countries, leveraging heavily on the digitalization of our asset-based processes. Our long-term strategy is confirmed and is accelerating, driven by the structural changes in the markets, further enhanced by the economic stimulus and the definition. The increased support on a green recovery will drive investment upwards and will open up new value pools that we are more than ready to capture.
Earnings are set to grow mid-high single digits, underpinning an increase in the shareholder remuneration of at least 7%, which is further supported by the minimum guaranteed dividend pressure policy. It is worth to highlight that our dividend policy has not changed, and we will continue to pay the highest dividend per share between the 70% payout mechanism and the minimum guaranteed, which has remained unchanged for all the years of the plan. Thanks for your attention, and let's now open to the Q&A session, Monica.
Okay, great. I hope the line is getting better from now on, as we have some weird noise on the line. We are now ready for our Q&A session.
We will keep up, as usual, with questions we received so far from Emanuele Jona, Banco Akros, Harry Wyburd, Bank of America Merrill Lynch, José Luis Vázquez, Rosalind Steel- Bernberg, Mikael Bjørnsen, Antonella Bianchessi Citi, Andrew Moulder, Credit Suisse, Stefano D'Alesio, Credit Suisse, Roberto Letizia, Equita, Alberto Gandolfi, Goldman Sachs , Javier Garrido, JP Morgan, [Claudio Antonino Catteler], Enrico Bartoli Mainfirst, Javier Suárez, Mediobanca, Rob Pulleyn, Morgan Stanley, and Óscar Naharro, Santander. The first question is for you, Francesco, and it's on the Full year Guidance that has been revised to take into account FX impact. Do you see any further risk to that?
Of course, at the very moment, we should say no. It is heavily depending on the COVID-19 evolution across geographies in the next months.
If things remain in the direction which we are seeing, both in Europe and the evolution in the U.S. and Latin America, the answer is, this is it. Should there be further combustions of this epidemic or pandemic, then this has to be assessed probably during the fall. As we spend, I think the FX effect, which is fully accounted in our projection at the year-end, is the problem without which we would not be having any change in our policy.
Okay. Second question, starting from the new level of 2020, what can we expect for 2021 and 2022 for both EBITDA and net income?
As you know, we are working now on the new plan, and we know that this is the plan that we present in November. Typically, this November would also be the one.
This plan will take into account the view that we have of the evolution of the COVID-19 through the end of the year and, of course, the spillover in 2021, and also the actions that we have to put in place to offset any longer-term trends that we can probably extrapolate at the end of the year. It will also take into account the positives that we started to sink in due to the actions, in particular in Europe, that will be put on the market by the EU Recovery Fund. This is something that we are studying and we'll factor in in 2021-2022. We will be able to appreciate this fully in November, which I cannot anticipate much.
You should also know that because this is 2020, we have a 2020-2030 10-year positioning for the company that we have developed, and it will be also important to give some perspective on the longer-term than the typical three-year cycle that we're used to give all the people. I know this is kind of a long-winded answer to explain everything, but basically, we do not expect much more than what we've seen in 2020 at this point in the negatives.
Okay. We move to the CFO net debt guidance, which changed as well. What are the main moving parts on the evolution of net debt?
As I said, we expect to close in the EUR 48 billion-EUR 49 billion range. It is clear that we have some moving parts of the year, and the main is the dumping processes and suspension of the currencies in which we are.
The early point depends on the real suspension or if there will be a prolongation of the dumping processes. If everything will go the way we foresee, we will recover EUR 1.2 billion of working capital, leaving EUR 800 million of working capital to be recovered the next year. The second point is, it's clear that we have increased our debt in the first half, also because we saw a window of opportunity in buy-back Latin America shares in Chile and in Latin America, and we did it. The overall plan foresees some coverage through some disposals that we have in the second half. It clearly depends on the fact that there will be the possibility to close some deals in the second half.
If there will be no deals in this time period, we will have some delays in covering these imports that we will do in the first quarter of 2021, depending on how the economic scenario will recover and also the deal-making will decide.
Okay. There are a couple of questions that I will split in two on the dynamics related with the working capital. The first one says, "Can you provide more color on the extraordinary components of the working capital, I assume, in the first half?"
As I said, the working capital has been mainly affected by the listing collection. What we did from one side, we worked to try to reduce the impact of the listing collection because of the possibility to get cash directly. Remember that it depends mainly on how the single countries are accustomed to pay.
We have countries with 80% of bank payments that suffer the little. Other countries that are based on a big percentage of physical payments that suffer the most. As I said, now the situation is heating up in other countries. In June, July has been very bad in terms of cashing. This is the way in which we see our forecast. In this way, we will recover the amount I said.
Another one on working capital, which is about the future. What is the level of recurring working capital that we should expect in a normalized year? What are the main drivers?
In a normalized year, as always said, we work with zero impact on working capital. This year, as I said, we think that we will end in having an impact of roughly EUR 800 million, not zero.
This EUR 800 million will be fully recovered in 2021.
Okay. Now, we go back to this semester, Alberto, and it is again for you. Can you provide a breakdown of COVID-19 impact on each business segment in the first semester?
First of all, I think it is relevant to say that we are working around an impact of EUR 300 million out of the FX impact. The FX impact is 100% on the Latin American business. We work with roughly EUR 300 million of the impact. If you split for the first, the impact in Europe and impact in Latam, I would say that 70%-80% of the impact comes from Latin America. Europe has an overall impact of near zero.
This is because the different businesses performed in different ways, but given the sense that the integrated position is offering a relief in terms of risk of the business. Going through the different business lines, I would say that the distribution business is impacted by around EUR 100 million, 100% Latin America. Retail business is impacted around EUR 200 million, almost 100% in Europe. I remember that this impact is for the overcontraction that retail is having in this year because they covered the power consumption. Now, as we sell the part that is exceeding the selling part at the price, at the spot price, that are 50% lower than the acquisition price. Generation is up, mainly up in Europe. All in all, the impact on generation on COVID is almost zero, with Europe up for trading and short position, and Latin America down mainly for volumes.
This is more or less the overall impact. We have this EUR 130 million by that impact. It is equally split between Europe and Latin America, 50-50, roughly EUR 70 million in Europe and EUR 70 million in Latin America.
Okay. We go back to you with Open Fiber. What is the latest on the Macquarie bid for the Enel stake in Open Fiber? Is the EUR 7 billion figure for the world entity correct?
We did receive an unsolicited non-binding offer from Macquarie, and that was discussed in the board of directors on June 10. After that, we did issue a statement, which is everything we can say at this point. We are sorry, but we cannot give many more information than what I just said.
Okay. Another one linked with Open Fiber.
Is Enel interested in selling, and what could be possible uses for the profits?
Look, we are not particularly interested in selling at this stage. We have commitments to pursue the industrial mission of Open Fiber, which is progressing extremely well. It is thanks to the Open Fiber efforts that Italy has regained position in the disgraced, laggard situation in which it was when Open Fiber started its activities. We think we are committed to continue the cabling activities of Open Fiber, which, by the way, created significant value. I think the value has been particularly underscored by the COVID crisis. We are not particularly keen on selling, said which that is valid not only for Open Fiber, but for basically anything we have.
It depends very much on what kind of offers are put on the table, and also on the fact that sooner or later, our mission industrially in Open Fiber will be considered complete. At that point, in any case, it will be the right time to monetize. It is early to say about that. It is early to say that we have decided to sell. We have not requested offers. We received unsolicited offers, as I said before. We are looking at all kinds of value creation alternatives. The use of proceeds is not particularly earmarked because, as I said, we do not have a decision to sell at this stage.
Okay. Another one on non-organic activities. Any update on M&A outlook strategy now that we are well into 2020? There has been some activity on renewables. Would you consider acquisition in the renewable space?
I would add another question that just came through the web, which is if you might consider a higher share of disposals in renewables in the forthcoming years.
Okay. On M&A, our view is the following. We do not think that the COVID crisis will pass unnoticed. There will be some casualties during this fall and this end of the year. Small players and developers of mid to small size will be caught out of breath and probably will have to sell either projects or sell themselves outright. We might be interested in some of these opportunities selectively and depending on geography and opportunity mix. As you know, we remain interested in grid acquisitions, as we consider networks to be a very important part of our industrial story. We are skeptical about large M&A schemes, particularly at this point in time and given the situation.
On the selling side, let's put it this way. We have, as you might have seen in the presentation, an incredibly large pipeline of development, and we have been successful in creating value selling projects after we have developed and built them. This might be opportunistically or strategically an avenue of value creation going forward, given the appetite for renewable portfolios that we observe on the market and given the depth of our pipeline. This is something we are assessing, and it will be clearly addressed during the November presentation.
Okay. Now, there is a question on offshore. A considerable opportunity opening up in offshore wind is the recurring one. The U.S. bust one. Do you see yourself opening up your horizons to include offshore? If so, how would you go about that in terms of gaining or acquiring the technical expertise?
Frankly speaking, I don't think you should invest into something just to learn about that something. This is a very strange way of doing things. Because we have a 100,000-plus MW pipeline that does not include offshore, we really don't need it. The reasons why we are remaining skeptical about the offshore is because, mainly, we don't need the pain, the lengthy processes, the incredible density of CapEx, and the risks associated with it. We respect those companies that focus on that only. We don't understand those that do everything, including offshore, because we think it really belongs to a different world. We don't think we should get involved, at least until it remains so expensive, so risky, and so lengthy in terms of construction time.
Okay. Filippia, again, Francesco for you.
You are now at 65% in Enel Chile and have an outstanding share swap on Enel Américas. There are two questions here. Are you expecting to get 65% in Américas soon? The second question is, what would be the end game once you get to that threshold?
We are progressing well on the swap. Of course, we will be able to give you the news as soon as this is completed, which is not going to happen in a long time. Pretty soon, there will be an announcement of when we are getting to a position that we consider proper in that. It is not a long time, but you have to wait for that. In Chile, we think we have a limit of shareholder ownership, which is in line with our policy for countries that have a liquid and working and functioning stock exchange like Chile.
We think that is the right position to have for Enel Chile. For Enel Américas, we think we should go beyond that threshold, but we can only do that once we get to 65%, and that we will discuss with the other shareholders once we have reached that point in order for them and us to do the best to maximize the value of the asset.
Okay. We move now to Alberto. There is a set of questions which are specifically focusing on here. The first one is on the regulatory measure called Penta Covid. The question is, how much you are expecting to get out of the regulatory measure, and when this fund will be available to the company?
Okay. We will get up around EUR 500 million by the Penta Covid. 70% will be available to the company end of July, in this case.
The difference will be paid up to December 2020, progressively along the second half.
Okay. The second one is, what is on top of that still under discussion?
Perfect. This move is the financial situation of distributors in Brazil. Now, what is needed is to reach an economic equilibrium for consumption, and so something that will recover the impact of demand losses and bad debt. We can foresee an extraordinary tariff review and a public hearing process that will start middle of August.
Okay. There is still, again, another question on Brazil. Can you break down the potential impact of lower demand volumes, debt impact from bad debts, and working capital overcontracting of power volumes?
Okay. On lower demand, the impact foreseen in the forecast for lower demand is about EUR 130 million.
The full or partial recovery of this part is, what I said, it's part of the ongoing discussion with the regulator. On bad debt and working capital, bad debt impact is seen at around EUR 30 million. I said the increase is driven by the freeze imposed on banking activities, and it depends on what the time will be until when the down negativity will be bent. On the other side, we have a worsening performance in the credit collection, but everything related to the financial impact has been reverted by the Penta Covid. This is one item that is covered by the Penta Covid. Also, the overcontracting.
The overcontracting in Brazil now is in the range of 6 terawatt hour, but it carries no economic impact because 58% of this overcontracting is covered by the current regulatory framework that covers the distributors up to 105% of overcontracting. The remaining part has been covered by the Penta Covid.
Okay. Again, to Alberto, another question on Brazil. Can you give us an update on the main operating parameters of your Brazilian grid?
I recap. Volumes are seen 7% decrease year on year. Network losses up around 1% because of the suspension of inspection and aimed detection codes and meter reading. Quality, we are having and we will have a significant improve. We see a 10 basis point improvement in our quality indicators.
Okay. Francesco, we go back to you. Completely different subject. Analysts are asking if there is any risk on dividend payment.
Yeah.
Before I answer the question, I have another thing to add to the previous one, which is the one on the 65% ownership of Enel Américas. We should know and appreciate that having 65% or lower percentage of Enel Américas has shielded us somehow from what has happened in Latin America during the COVID-19. When we will assess what to do next, we will also take that into account because this has been quite an interesting point of view, which we have appreciated of having not 100% of consolidating the results of Enel Américas, not 100%. That said, on dividends, no, we do not have a policy change. We maintain the 70% payout ratio on earnings. We do not have any visibility of negatives that make us change that policy at all. Do not forget, we also have the minimum guaranteed, which we restate that covers the planned period.
It will extend until 2022, unchanged.
Okay. For you, Francesco, there is lots of interest around potential acceleration in investment, particularly in Europe. Questions on that and specifically on the EU Recovery Fund. What else do you think is needed in order for Enel to increase the share of renewable investments towards Europe and in Italy in particular?
I think I should add that if you look at where the funds are mostly going, they are going to Italy, Spain, Romania. Those three countries are the ones where we are present, and therefore we have a big opportunity in that sense. We think that the investments will be along development of renewables, investments in networks that fundamentally need to be reinforced in order to adjust to a growing number of renewables, storage, which again needs to be there in order to adjust to the networks for renewables.
The whole networks renewable storage triangle is the core of the investments that we had already targeted, which now there is an incredible opportunity to accelerate, coupled with digital. Again, networks and fiber optics are also closely connected. We think there will be an additional boost from private funding, not necessarily European funding, provided that sustainable finance sees clear into the direction in which Europe is going. It is a very interesting and very important positive evolution. On the negative side, obviously, the question is, will the bureaucracies of the single member states be able to process the amount of work needed to discharge and to use this fund in the time period that is allocated by the commission?
That is something where we have to work hard and support all governments of Europe, Spain, Italy, Greece, Romania, every government in which we have presence and we want to grow to really manage this properly.
Okay. It was actually a specific question on bureaucracy in Italy, but I think that you have just answered to that as well. The next one is on something that we mentioned on the press release. In the press release, you mentioned a big transformation within generation activities. Can you explain what it means?
It means that what we have been doing so far is now becoming extremely evident and is precipitated, if you want, in a spectacular way by the COVID-19 crunch on demand. The thermal squeeze is squeezing out faster than ever what was already going to be squeezed out, so mostly coal and somehow gas.
What this means is that there will be the need to transition a lot of people into a new workforce that will no more deal with coal plants but with other kinds of investments. In that transition, we will need to address the need to perhaps have some of our colleagues upskill, reskill, and so others probably gradually being able to leave the working condition and go into retirement. We are talking about setting up schemes within the just transition mechanisms that will allow more senior colleagues—we are talking about 1,000-1,300 people—to go into voluntary early retirement covered by special mechanisms that we are setting up for this very particular situation. This is going to have different time frames because certain countries do it earlier, but this is going to be repeated across several countries, more or less, in the next few years.
Okay. Great.
We have now a set of questions on our global business lines. I'll try to go through them quickly. The first one, I think, is for you, Francesco. With the 800 MW shifted to early 2021, how the shape of delivery of the 14.1 GW for 2022 will change? Any impact on profitability?
On the commitment, I think we have already commented during the presentation. We are totally sure that we will reach or probably exceed this 14,100 MW of 2020, 2022 additional installed capacity at the end of 2022. We do not have an issue there. Some MW that were planned to come online at the end of 2020 will probably move to 2021 because of COVID-19-related delays, but they will not impact the 2021 installed capacity.
Twenty twenty-one will be an exceptional year in which we will keep working at the twenty twenty-one, let's say, originally scheduled plants, and probably they will also get the 800 that moved from twenty twenty to twenty twenty-one. We do not see a material impact at all on the 2022 target. Like we said before, we are confident we will probably go to exceed that once we look at the new strategy courses that we are going to present at the end of the year.
Okay. Now, I will stay with you, Francesco, for a really top question. The Green Deal has kick-started also the hydrogen technology. Are you interested in investing into this type of generation source? And what could be Enel's business model on hydrogen, and what level of returns do you see?
Look, in 2002. Enel's funding is fascinating. Why that? It is a long story, but why this time is—that is a question.
There are two things that happened. One is, in 2002, renewables did not exist the way they exist today. They did not exist at all, and those that existed were a joke. Today, renewables are cheap, fast-growing, and they are displacing the rest of energy generation worldwide, bringing the covered electricity to levels that were unthinkable at that time. That is number one change. The number two change is that it is now, because of technological evolution, possible to conceive a reduction in the cost of electrolyzers. The plants that break up water to generate hydrogen and oxygen will make the green hydrogen production competitive, coupled with an adequate level of competitive renewable energy. These two things were not there at that time when Mr. Rifkin wrote his book, but they are there today.
We think it's perhaps the right time for hydrogen to be green, not blue or other colors, which are a joke, but the green hydrogen, I think, has a real chance. We are going to, of course, work hard at making this economically convenient and competitive with normal hydrogen, which is very cost-effective but extremely polluting in terms of CO2. We are going to invest in trying to make this technology work in the next years. There is not a time frame in which you can say in the next three years this will happen. It will probably happen in a time frame between 5-10 years. We think this is something that we strongly believe can happen, as we did strongly believe on competitiveness of renewables when people didn't have a clue about it.
We're not interested in blue hydrogen and other stuff because we don't think CCS is a working economically technology. We've gone through that already. We're focusing on green, and I think it can be probably the success that we all need. In terms of returns, of course, it's industrial applications or clean hydrogen that are compatible with this kind of industry. We're not talking about spectacular returns, but returns that are in the IT digit.
Okay. Next question is on portfolio rotation on renewables for 2020. Alberto, do you want to answer to that?
I think, Alberto, you are on mute.
Alberto, you are on mute.
Yes. Yes. I was saying only minor operation are towards 2022. Okay. Hydro avail ability, how has 2020 been so far, and what is the expectation for the full year?
We had hydro production up 4% versus last year, and this has been driven particularly by the strong performance recorded on reservoirs during the first quarter of the year. Expectation is aligned with the trend that we have seen in the first half, with a general scarcity of resources all throughout the year. The technical availability of hydroplants is aligned with the best historical performance.
Okay. Now, Francesco, we go back to you on a question about repowering potential for hydroplants in Italy, I guess, and concession update again in Italy.
Okay. Our concessions are the ones expiring at the end of the cycle. So we have a 2029, sorry, 2029 date for the concession of our hydroplants, large hydroplants. However, other players have concessions that have already expired and are renewed on a daily basis, so this is a real problem for some of them.
We think that there is a potential for investment for repowering and enlarging hydro potential in the country. That potential is hampered due to the lack of visibility on the concession date. Maybe that is not so much valid for us because we do have at least another nine years. Do not forget, investment in hydro typically goes a longer time. Today, we have a plan that covers about EUR 150 million for 2022. Of the repowering, we said will take place regardless of concession expiration because, as I said, we go to 2029, so it is a long year out. It could be much more provided they have visibility over a longer time period, and this is more so for all the other hydro players in the country which have a shorter time to decide.
I think this is likely to be a case in which the Italian government might look into this and prolong concessions. Consider to give stability of time frame, time horizon for additional investment to be unlocked now in the light of the present needle investment phase. I think it is positive, and I think it might happen.
Okay. Good. Last time you asked, Francesco, again for you, do you see a deceleration in ongoing negotiations for PPAs or options in these areas?
I think I should separate two things. There is not a lack of deceleration in the demand. We see a lot of tenders still floating around. There has been, in the last two months, some, let's say, physical deceleration in the interfacing during the negotiations with PPAs because of lockdown constraints, but minor and totally manageable. Overall, the answer is no.
We don't see a change because of COVID-19 at this point. We see robust demand for PPAs on a renewable energy basis across the Americas, north, center, south, of course, with different time frames depending on the country. Overall, no flexion there.
Okay. On conventional generation, we moved to conventional generation. Alberto, analysts are asking what has been the short position in the first half, how it has evolved compared to the first quarter, and what are your expectations for the second half? Alberto, you're on mute.
In the short position, we got in the first half of 2020 around EUR 120 million. This because the sharp drop in prices opened these market opportunities. In the second half, it will depend on the evolution of electricity prices. What we see is that we might expect the benefits potentially will stay. No major changes along the second half.
Okay.
Sorry. Go ahead.
Sorry, Excume me. Go ahead.
There is a kind of complementing question on balancing services. The question is, can you quantify the impact of the balancing service during the semester?
Okay. This is a different situation. It is mainly as a consequence of increasing the system needs due to the low demand scenario in the lockdown period. Because of this, in the first half, initially, because in Spain, it is a pass-through, you do not account anything from the services. It was up EUR 16 million versus last year. Also, for this, we do not see this going to change. Situation is going to be normalized, and also the need of extra services is going to go down in the second half.
There is a question on coal phase out, Francesco. Updated expectation for 2020 in light of the acceleration we have seen in the first half.
In 2020, we already gave the figures, basically. We are looking now at what happens after that. I think Italy and Chile have accelerated, so we will go at the end of the plant cycle, so it is 2022. Remember, the plant cycle by 2022, we should have had 6.6 GW. We will be substantially below that in terms of MW installed. We will also be much more lower than what we had originally estimated in terms of production coming from those MW. I think you have appreciated the fact that during 2020, there was a collapse of coal production. Clearly, this is due to COVID mostly, but this is going to stay, I think, for the 2021, 2022 period. Well below the 6.6 GW, yes. Much more below the terawatt hours targeted by 2022.
I think it was 5 terawatt hours, something like that, by the end of 2022.
Okay. Alberto, there is a question for you on the hedging for 2021. If you can just provide us an update.
Okay. Yes. We have had some progress in the 2021 hedging. Italy is now around 70% hedged from 50% in the first quarter. Spain is around 90% hedged versus 20% in the first quarter. As you remember, these projects are also based on the fact that our price-driven production, the production from renewables and nuclear, is always naturally hedged through the retail customers.
Okay. There is a question around the drop in volumes across different Lat Am countries. In particular, what we expect for year-end.
Alberto? Hello?
Hello?
Yeah. Yeah.
I have some trouble with my earphones. Okay. In South America, energy demand dropped 6% versus the previous year, with different impact countries.
Peru was down 10%, Brazil down 7%, Chile-Colombia 5%. Argentina was almost in line with the previous year. We expect for the second half a gradual recovery of energy consumption, something that we are already experiencing in June and in July. With the last numbers that we are having, are pointing at a gradual recovery in energy consumption.
Okay. A question for you, Alberto, about networks. If there is any regulatory risk that might be taken into consideration?
No. I think that we have good visibility on regulation. Regulatory activity will continue in line also with the so already defined across countries. It is clear that we have some additional requests to regulators. What is happening in Brazil and in other Latin American countries is relevant to us. This is something that we have to follow strictly.
For the normal way of so the regulation improves, so the regulatory period, we do not see any major changes. In Chile, consultation process for the next regulatory cycle is ongoing. In Colombia, tariffs have been issued and came in line with expectation. Also in Romania, we have so the new WACC defined that is now 6.4. It was expected at the beginning 6.9, but 6.4 is in line with our assumption in the business plan.
Okay. Great. We move to the last type of question on business. We move to retail. CEO, for you, interesting question about the future. What structural changes to power mix is management considering, given the possibility of more working from home and online retailing versus office power demand and high-street retailing? Could this represent a significant change in the mix between B2C and B2B, and how would this impact Enel?
This is kind of a logical question, supposedly, if we project ourselves for many years in a world like the one we've been living in the last few months, which is pretty tough to consider because I don't think this is a sustainable situation over the long, medium term. It is intellectually interesting, and I think it might happen to some extent, but probably not all of a sudden and not as deep as we have observed today. There will be a bounce back. That said, I think we have all the tools to observe and adapt to that. We have a very diversified and large customer B2C base, and therefore, if you think that this is a scenario that looks like possibly, then the B2C customers become even more important than they are today.
Overall, this is net positive for anyone that has a very large B2C percentage in its portfolio customers. That said, to say that B2B is dead tomorrow, that is a little bit exaggerated. Directionally, by buying, this is a scenario that can have its own validity, and we are focusing on it. It will be something that we will consider also in the next three-year plan or longer-term 10-year plan.
Okay. Alberto, there are a list of questions regarding the marginality and the volumes on the retail business, particularly in Italy and Spain. The first one says, "Can you provide a breakdown of B2B and B2C for Italy and Spain and elaborate on the movement observed in the first quarter?" Imagine the volumes.
Okay. First, Italy. Power sold in Italy is down 6% year-on-year. B2B segment is down 10%, and B2C segment is up 9%.
This is Italy. In Spain, the overall volumes are down 11%, and this is driven by the B2B segment that is down 14%. B2C is slightly decreasing. It is down 1%. Two different situations for the B2C business in the two countries. As you can see, the contraction of the industrial activities is the main driver. The economic impact of this shift in volumes is limited because these segments run on completely different marginality. The marginality on the B2B is the lowest, and the B2C is the highest marginality that we have in our segments.
I would say probably with this last part of your answer, you provide also color on the following question regarding margins for B2B and B2C in Italy and Spain. I think the next one is quite interesting, and it goes back to the signs of recovery.
Is there any sign of recovery for electricity demand in Italy and Spain?
The answer is yes. In April, we saw a reduction of around 30% in the consumption of the B2B segment, while B2C increased for the large scale of smart working. In June, B2B in both countries' consumption was down 12%, with the first clear signs of recovery. In the first three weeks of July, we see a further improvement in demand in European countries and also in Brazil, in Peru, and Latin America. All the other countries in which we work have seen evident recovery in June and July.
The next question aims at understanding how the commercial portfolio moved during the COVID crisis. The question is, how did the commercial portfolio change over the first half in terms of customer acquired and lost? Alberto.
Yes.
To retail operations continued to work properly. We have a stable commercial portfolio in Spain, while in Italy, we ended up with a slightly higher portfolio of customers. After the initial slowdown, the acquisition of customers rolled over in the last two months, and also thanks to the ease of our restrictions and also to the deployment of new commercial campaigns that bring the acquisition level almost in line with the previous year.
Okay. Again, I think, Alberto, for you, the churn rate, what was the level of churn rate, and if the level we observed in the first half was in line with our expectations?
In Italy, we recorded a small increase in churn rate. This is in line with our expectations. I remember that in Enel, churn rate is absolutely under Italian market average.
In Nigeria, we also registered an increase of our market share of approximately 0.7 percentage points versus the end of 2019. We are working in the two countries in the range of 10-11% of churn rate.
Okay. Last one on retail. First half indicated that the Italian free market customer base reached 9.4 million. Is your 18.5 million target to 2022 still valid? Alberto, I think it is again for you.
Assumptions of doubling customers in the free market are underpinned by the elimination of the regulatory tariffs by 2022 and therefore associated with specific timelines.
In any case, if the deadline is once again postponed, we do not see that there will be material economic impact on our accounts because the assumption we have is that the time in which we will free the market, so the regulatory tariff will be canceled, we will lose roughly 50% of the regulatory customers we are serving today. It is more what we are doing better than this in moving our customer base along the years from the regulated business to the liberalized one.
Okay. Now, four quick questions on financials, and then we will go to the last minute question coming from our email address. Alberto, four questions for you. Cost of debt is down 70 basis points versus 2019. Can we expect a steeper reduction versus climate sanctions?
Not for this year. We do not expect further decrease this year.
It is clear that we will still continue doing our liability actions to further reduce the cost of debt in line with what we said in our business plan.
Okay. Another one, really quick. Can you provide more color on the reduction of cash over the period?
Now, we have cash of EUR 6 billion, down EUR 3 billion versus full year 2019. EUR 6 billion is the normalized level of cash we work with. The level of 2019 was higher than EUR 3 billion because of the three financial activities that we carried out at the end of previous year.
Okay. A question on provisional reversal in Spain. Does it still account for the same amount as in first quarter? Any compensating items, I'd say, in the second quarter?
It accounts for the same. There are no compensating items emerged there over the second quarter.
Last one on financials. What is the impact on your bad-debt provisions, and what are the measures that will be implemented in order to recover it?
As I said, the bad-debt provision, we recorded an increase of EUR 130 million, as said, mainly driven by the stop of banking activities. The overall impact is still evolving in line with various moving parts related to the pandemic and unpredictable future evolution. Across all countries, we have put in motion managerial action, and we are engaged in discussion, as said, with the regulators to try to fully compensate the impact through regulatory measures.
Okay. Now, I would move to the Q&A that came through our email last minute.
33, 34, 39, 9.
Hello? Hello? Hello? Hello? Hello?
Monica, we can hear you.
Okay. Perfect. Now I can hear you, but.
Sorry. My line dropped.
I was saying, how can renewables growth be accelerated in Italy for additional investments to help with the post-COVID-19 recovery? Francesca, I think that's for you.
I think this is a question that is valid for Italy, but also for Spain and other countries in Europe in general. I think it is not so much an issue of funding, but it is an issue of the bottlenecking, the permitting trace on one side, and improving the interconnecting infrastructures and networks, medium voltage, low voltage, and high voltage network interconnectivity. These are two things that need to happen. The first one is more on legal and regulatory matters. The second one is more on infrastructure investment, which is part of the effort that we are placing in front of the various governments and therefore the EU, to speed up the reinforcement of networks to prepare for this.
It is more administrative and infrastructural on the network side than the plant themselves. There is a backlog of investments just waiting for things to unfold.
Okay. Another one for you, Francesca, I think. How large is the opportunity to step up investments over the next year due to the change in policy environment? Do you foresee an acceleration towards more capital recycling in your renewables model?
We never really did capital recycling because we do not have that need. The question is, we have been selling renewables because they make sense in terms of value creation. In a way, there were people seeing a different value in the cash flow streams that the same plant was generating vis-à-vis our view. That is the only reason why we sold generation plants and renewables. That can happen also in the future.
I mean, every time we see this potential value creation, we'll use it. Maybe with the only exception of those places where we have an integrated position on the customer side, so we need generation to be fully hedged. That's the only exception to the rule. On acceleration, I think there is definitely the potential to do that. Not a lack of opportunities, but rather, let's say, a need to cover large parts of the world that are still verging from the standpoint where we are today preparing for additional growth. It is a very exciting space.
Okay. Alberto, for you, question number three on kind of a specification, to be more specific on the guidance.
Can you please clarify if the EUR 5.2 billion net income includes one-off costs that are supposed to compensate for the provisional release recorded in the first quarter in Nigeria, or if the guidance includes only the positive contribution from the provisional release?
Guidance net income this year is based on several assumptions. It is associated with operating performance and, as said, also with the improving of the situation related to the debt and other things. What I can say is that the bottom part of the range in these projections to be absorbed benefit for the provisional release of the data.
There is another question number four on the effects of sanctions on which our new guidance is based. I think we can provide these numbers to the analysts that were just asked for this one.
Question number five, again on the guidance, business countries where the EBITDA guidance has been changed.
Sì. Let's say, if we compare our guidance versus business plan, lower EBITDA mainly refers to results in Latin America. Here, the main changes are related, as said, on FX rates. On the other end, as said, it mainly concentrates on the potential impact on infrastructure and network in retail business. What I might say is that at the end, we foresee that European countries will compensate some impacts coming from the Latin American business. The only part of the EBITDA not recovered will be composed by the FX depreciation at the end of the year.
Okay. Question number six, I think it's for our CEO. Should we assume the guidance cut through 2021?
I presume we want to wait until the CMD, but you can give us some directional guidance. Should we now expect a lower number for 2021?
No, I think it's too early to do that. I don't think you should expect a lower number for 2021 because we had the COVID in April 2020. I think it's a bit of exaggeration. No, the answer is simply no. Just wait until the CMD and don't extrapolate unnecessary negatives too long.
Okay. I think we are close to the really last question, which is about the focus on sustainability SDG bond. Given S&P recent indication about SDG hybrids, do you think that hybrids green bonds could fit your strategy, Alberto?
I would say that hybrids have a different nature because they have this equity content.
For this and because the discussions are still ongoing with the rating agencies, they have not been considered and included in our target of sustainable finance set. They are out, and at the time of this, we are still discussing with rating agencies to understand the way in which also these instruments can be included in the future in the sustainable finance portfolio.
Okay. I think this is actually the last question. We covered them all. If we miss anything, as always, myself and the entire investor relations team will be at your disposal. I think we can just wish you a good summer break, and we'll be back in September. Thank you to the CEO and CFO.
Thank you, everybody. Thank you, Monica.
Thank you. Bye-bye. Thank you.
Bye.