Good evening, ladies and gentlemen. I'm Monica Girardi, Head of Group Investor Relations. A warm welcome to the first quarter 2020 results presentation, which will be hosted by our CFO, Alberto De Paoli. We hope you and your families are well and safe in these difficult times. In this presentation, Alberto, we'll walk you through the highlights of the quarter, as well as the operational and financial performance for the Enel Group. During the call, we will also touch base on the main evidences that we have seen during the quarter in terms of impacts related to coronavirus, as well as how Enel's solid liquidity position and balance sheet allow withstanding even the most volatile scenarios. Following the presentation, we will have the usual Q&A session. Similarly to what was done for the full year results, we ask those connected to send questions only via email at investor.relations@enel.com.
Before we start, let me remind you that the 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 to everybody. As usual, our opening slide is dedicated to the highlights of the period. I am on page number one. During the first quarter of 2020, the Group delivered solid financial results, showing a high level of resiliency against sudden temporary shocks. EBITDA grew 6%, and net income increased double-digit. Financial effects associated with the COVID-19 crisis were limited, as the Group Integrated Model offered an operating protection. I will elaborate on this later in the presentation. More than 400 MW of new renewable capacity were built in the first three months of the year, following an exceptionally high level of new capacity installed during the last quarter of 2019, which contributed in full to first quarter financials.
Thanks to the acceleration of new renewable installation, ongoing actions on coal power plants, and the reduction of thermal gap, 65% of the Group's production was emission-free. Simplification of the Group structure continues, and we made significant progress to reach a 65% stake in both Enel Americas and Enel Chile. Before analyzing financial indicators, let me spend the next couple of slides wrapping up on COVID-19. I'm on page number two. Before deep diving into the Q1 results, let me go to the main business and financial evolutions that we have seen during the quarter in relation to COVID-19, focusing on our business lines. During the quarter, we did not experience any material disruption in the supply chain of renewables, and this allowed us to build more than 400 MW, as already said.
On the conventional generation side, our structurally short position and our hedging policy of set lower volumes and decreasing market prices impact overall. Since the outbreak of the virus, we also witnessed high activity on the balancing services due to a more difficult prediction of the network load. Regulatory frameworks in Europe proved protective against the 5% and the 3% drop in distributed volumes in Italy and Spain. In Latin America, the decrease has been a mere 1% decrease, with almost nil impact on our accounts. Energy sold in the free market has decreased by 4% globally, so the most evident impact on our retail business has been in terms of composition of the demand, as lockdowns have caused an important shift from business to domestic consumption.
In Italy and Spain, in particular, we have witnessed a 3% decrease in business demand, coupled with a 1% increase in domestic demand due to lockdowns. Overall, our retail EBITDA has increased by 9% year- on- year, as we will see later in the presentation. Finally, the negative effects impact on the quarter, driven by the devaluation of Latin American currencies, amounts to around EUR 130 million, of which more than half is linked to the depreciation registered from the beginning of the year, so registered due to the COVID outbreak. The negative impact at net income level was around EUR 20 million. Moving now on the financial management, liquidity is abundant, amounting to around EUR 26 billion as of the end of April, around EUR 6 billion in cash on hand, and the rest readily available committed credit lines.
Liberal liquidity debt maturities after the end of 2021, because they totaling EUR 5.9 billion, we have a coverage ratio of 4.4 times, and in addition, the current level of availability liquidity covers 2.1 times the debt maturity through 2022. In the first quarter, working capital increased by approximately EUR 400 million due to the bills' delayed payments attributable to COVID-19. A strong balance sheet with a lower debt leverage compared to our average peers allows us to face even the most volatile scenarios, as the one we have been seeing in the last couple of months. Moving now on page number three, this is a quick look at the initiative that Enel has taken so far. Current COVID-19 crisis has highlighted the importance of Enel's past investments in securing business continuity, even in the most adverse scenarios.
As of today, 37,500 Enel employees work remotely; that is 55% of our global workforce. We can demonstrate that people can work from remote with an unchanged level of efficiency and effectiveness. Enel has protected its workforce not only through smart working and safe measures implemented, but also through an insurance policy covering all of our employees worldwide that is granting a cash allowance in case of hospitalization. In Italy, for employees engaged in operational activities that cannot be carried out remotely and which are currently reduced or suspended for periods of inactivity, a vacation day bank mechanism has been created. As of April 3rd, around 21,000 days have been voluntarily donated by Enel employees and around 30,000 by the company. In addition, as recently communicated, the NBO targets of the CEO have been changed in order to tackle employee safety and service continuity during the COVID-19 crisis.
As an immediate response to the emergency, Enel Group has identified in all of its countries a presence of over 200 initiatives, 70% directly support health organizations, while the remaining aims at mitigating the socio-economic impact on communities, with a specific focus on areas close to our power plants and construction sites. The Group donated around EUR 50 million globally for a series of measures to support key organizations involved in providing health services and support in response to the COVID emergency. Moreover, the CEO and the top management reporting directly to him have committed to donate an amount equal to the remuneration matured during the lockdown period in Italy, or almost 50% of the total remuneration. Finally, Enel is also leveraging its crowdsourcing platform, OpenInnovability.com, to launch internal calls for ideas to help countries dealing with the emergency.
Now we can move to slide number four on our sustainable CapEx plan. As you can see from the chart, overall CapEx in the first quarter was equal to EUR 1.9 billion in line with last year. Around 90% of total investments were devoted to infrastructure and network and renewables, to the ongoing effort to digitalize grids and decarbonize our generation fleet. Development CapEx excluded EUR 1 billion and represented more than 50% of total investments, of which 70% was allocated to renewables, mainly in Latin America and North America. Looking at the 2022 period, around 70% of asset development CapEx is already addressed, proving high visibility for industrial targets for the time period. Now moving to slide number five and focusing on our decarbonization strategy.
As you can see from the chart, in the first quarter of the year, as already said, we built more than 400 MW, and we sold around 200 MW of managed capacity, reaching 46 GW in total. In terms of production, this is worth highlighting that renewables production increased by 9% versus previous year, while coal production collapsed by almost 80% as a consequence of shrinking thermal gap and the ongoing coal phase-out process. As a result, the share emission-free production increased to 65%, 12 percentage points higher than in Q1 2019. The deployment of new renewable capacity will be supported by 3.2 GW that are in execution phase and 0.4 GW fully permitted. Before going through the details of the financial performance, let me comment on our progresses and efficiencies, which will be analyzed in the following slide, and I am on slide number six.
In the first quarter of the year, operating expenses decreased by around 4%, or around EUR 80 million, mainly thanks to the efficiencies recorded in the period. The level of OpEx, which amounts to EUR 1.7 billion, has been positively affected also by the provision released in Spain for around EUR 356 million, which we will detail in the following slide. Over the period, we recorded efficiencies for around EUR 80 million, twice the amount registered in the same period of the last year, mainly in conventional generation, retail, and networks. The level of efficiency locked during the Q1 does well for full-year targets. We will now go to the details of the operating and financial performance for the period, and now we are on slide number eight. As you can see from the recap, EBITDA grew by 6% and came in at EUR 4.7 billion.
Excluding the impact of FX devaluation for around EUR 130 million, EBITDA would have grown by up 9% to EUR 4.9 billion. The FX negative impact attributable to COVID-19 has been around EUR 80 million, representing the devaluation effect in the period January-March 2020 since the start of lockdown measures in China. Group net ordinary income came in at EUR 1.3 billion, 11% higher versus last year. FFO reached EUR 2.1 billion, down 17% year on year, due to around EUR 400 million increase in working capital attributable to COVID-19 crisis. Group net debt stood at EUR 47.1 billion, increasing by 4% versus year-end 2019. Let's now take a look at the Group EBITDA on slide number nine. As already commented, ordinary EBITDA grew 6% to EUR 4.7 billion.
Main drivers of this evolution are the following: EUR 90 million associated with global power generation, the new business line we have created to take full advantage of the energy transition, network and Enel X representing our enablers of the decarbonization strategy, accounting for almost EUR 140 million, and finally, retail recorded an EUR 80 million growth. I will detail key drivers for each business in the next slide, starting from global power generation on slide number 10. In this slide, we take a look at the performance of the global generation line, for which we will now comment on the main factors that have driven its results, while we will go in more detail through the performance of these constituents of Energy and Power and the conventional generation in the following slides. Global power generation ordinary EBITDA reached EUR 1.8 billion, making an increase of 5%.
It is worth reminding you that last year, performance included around EUR 100 million capital gain associated with the full consolidation of our North America assets, as well as EUR 160 million positive contribution associated with the early termination of a PPA contract in Chile. This year, the quarter has been positively impacted by a provision reversal in Spain for around EUR 170 million. Net of non-replicable items recorded in both Q1 2019 and Q1 2020, the underlying operating performance has recorded an overall improvement of 12%, or around EUR 180 million, a remarkable achievement, whose components I will analyze in the next two slides dedicated to Energy and Power and conventional generation, and we will start from Energy and Power on page 11. As you can see from the chart, ordinary EBITDA came in at EUR 1.1 billion.
As mentioned previously, Q1 2019 EBITDA has been positively affected by a net capital gain and the positive contribution associated with the early termination of a PPA contract in Chile. As a result, the underlying operating performance has recorded an improvement by 7%, or more than EUR 70 million, of which EUR 40 million for new renewable capacity made in North America and Liberia, EUR 60 million coming from higher volumes, particularly in Spain and Italy, where renewable production overall increased by 1.6 TWh, driven by better hydro performance, and plus EUR 40 million as a result of higher prices fully hedged, driven by Italy and Latin America. We had a negative impact on delta perimeter for around EUR 20 million, mainly attributable to the EBITDA of the capacity sold in Brazil at the very start of 2019.
Finally, it is worth highlighting that FX depreciation weighed negatively for around EUR 50 million, with the effect mostly attributable to Latin America CapExes, with more than two-thirds of the impact occurring in the first quarter of the year as an effect of the COVID-19. Moving now to conventional generation, and I am on page 12, ordinary EBITDA increased by 39% and came in at EUR 700 million. The current quarter was 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 contract in Chile for EUR 80 million.
Net of these items, the underlying operating performance has recorded an improvement of 25%, or around EUR 110 million, mainly due to EUR 60 million as a result of the group's short position, EUR 60 million resulting from higher prices hedged and from balancing services in Italy and Spain, and more than EUR 30 million from efficiencies made in Spain and Italy. Delta perimeter impacted negatively for around EUR 20 million attributable to EBITDA of the skilled kayak line in Russia, and FX depreciation of Latin America impacted for EUR 20 million negatively. Let's now take a look at our infrastructure and network on slide 13. As you can see, ordinary EBITDA increased by 7% year on year and came in at EUR 2 billion. The reversal of the provision in Spain impacted the ordinary EBITDA for around EUR 180 million.
As a result, the underlying operating performance has been broadly stable year on year. The main moving parts have been the following: EUR 30 million increase related to investment, efficiencies for around EUR 10 million, and then negative impact on CPIs on OpEx for EUR 30 million, and currency devaluation that impacted negatively for around EUR 60 million. On this amount, around EUR 40 million attributable to COVID-19 crisis. On the operating side, volumes dropped by 4% in Europe and 1% in Latin America countries. European regulatory frameworks are based on revenue cap systems that are not exposing networks remuneration to volumes volatility. In that, some price cap mechanisms leave a certain grade of exposure to volumes within the regulatory period. During the first quarter, the corresponding financial impact has been negligible.
Finally, on retail, and I am on page 14, ordinary EBITDA reached more than EUR 900 million, increasing 9% versus last year. The increase is almost entirely attributable to the free market. In particular, free market EBITDA grew by around EUR 75 million or plus 10%. The main components of this performance are as follows. In Spain, a 40% increase in power unitary margin more than offset a 3% decrease in electricity volumes. In Italy, the result in the period was mainly driven by gas operations. In fact, gas retail EBITDA was down around EUR 30 million on declining consumption, coupled with declining unitary margins. Electricity retail EBITDA proved broadly stable, protected by a changing volume mix more skewed towards B2C and unchanged unitary margin.
Regulated market EBITDA slightly increased by 3%, reaching EUR 150 million at the end of the period, mainly thanks to the contribution of Romania and Spain. Finally, we recorded efficiencies for around EUR 10 million, mainly in Italy and Spain, both in the free and in the regulated markets. Now we have gone through business drivers, and we can now move to the financial management section. I'm now on page 15. Ordinary group net income came in at EUR 1.3 billion, 11% higher than last year, mainly thanks to the increase in ordinary EBITDA and lower financial expenses, which more than offset the increase in D&A and then higher tax rate. D&A slightly increased, mainly refers to investment deployed, in part compensated by lower depreciation in Italy and Iberia, thanks to coal impairment made in 2019.
The decrease in financial expenses reflects the continuous decrease of the cost of debt, which declined by around 20 basis points versus year-end 2019, resulting from equity investment stood at EUR 14 million, tax increased by EUR 185 million year-on-year, mainly due to EUR 105 million for higher earning before taxes, and because in 2019 we recognized the first tax asset in the U.S. and in Argentina. Minorities increased by 11%, reflecting a higher total net income. Moving now on page 16 on the cash flow, FFO stands at EUR 2.1 billion, about EUR 400 million lower than last year. Delta is mainly attributable to movements in working capital, which reached EUR 1.5 billion in the first quarter 2020 versus EUR 1.1 billion last year. The increase is due to delays in bills collection related to the lockdown status in different countries.
We expect to partially recover the negative working capital in the second half of the year as a consequence of the return to a stabilizing situation worldwide, hoping that the worst is over. Free cash flow stood at EUR 200 million, confirming the capacity of the group to cover the investments, the growth, with the operating cash generation not withstanding the extraordinary scenario. Now on page 17, have a look on the net debt. Net debt stood at EUR 47.1 billion. Changes are driven by the positive free cash flow of EUR 200 million, as already commented. Dividends paid for EUR 2.2 billion in the quarter. Cash outflow related to the further increase in the share of Enel Americas through the equity swap, and EUR 200 million positive FX impact from devaluation of local currencies against the euro.
The level of net debt at the FX rates set through hedges amounts to EUR 46.1 billion. Our gross debt increased by around EUR 1.5 billion, mainly explained by the evolution of net debt already commented. Before the closing remarks, let's take a deeper look into our liquidity position and forecoming debt maturities at page 18. Our total liquidity at the end of April stood nearly EUR 26 billion, EUR 6 billion in cash on hand, and the remaining EUR 20 billion in readily available committed credit lines. The level of liquidity covers 21.1 times the debt maturing throughout 2020-2022 and amounting at EUR 12 billion, net of short-term debt that is rolled over every month and every period. Also including the short-term debt, the liquidity-to-debt coverage ratio would still be at 1.3 times. Our counterparty risk is minimized through a number of diversification.
Our cash is invested in a total of around 70 banks, with 95% of cash in current accounts or overnight deposits. Our committed credit lines encompass a total of around 50 banks. Now on page 19, some closing remarks. The first quarter of the year showed a solid evolution of the underlying performance despite anti-COVID-19 measures that have been implemented in some of the markets where the group operates. For the time being, we project limited impacts associated with lockdowns. Moreover, we see this impact as manageable and not to affect the growth trajectory of the company. The resiliency of the group is due to a robust integrated business model, which absorbs temporary shocks and limits economic and financial volatility. Additionally, we acted promptly to reinforce the business, guaranteed continuity, protecting our people first. Actions we put in place are not a detriment of business performance.
They are sustainable in the medium and long term and set to last at least until December. As scheduled, the annual general meeting to be held on May 14, we'd approve the final dividend payment in July and the new remuneration policy where sustainability will take a central role. In the short term, protecting the health of our employees and in the long term to support the economic recovery of our country's presence. Thank you for your attention, and let's now open for the Q&A session.
Okay, great. We now jump on Q&A. So far, we have received questions from Equitas, Santander, Mediobanca, May First, CaixaBank, JP Morgan, Morgan Stanley, Merrill Lynch Bank of America, Akros, Credit Suisse, Berenberg, Deutsche Bank, Swedbank, Goldman Sachs, and Barclays. Thanks to all of you.
As usual, we aim at having a hard stop at 7:30 P.M. Central European Time, so let's get started. We start with a number of questions which are related to COVID-19. The first one is on renewable capacity builds. Q1 delivery came in as planned?
Q1, as I said in the speech, yes, the delivery was broadly in line. We had minor delays associated with the interconnection and permitting issues, but our delays were anyway recovered during April and during the second quarter.
Okay. Next, do you foresee any change in the shape of delivery of the 14.1 GW for 2020-2022? What is the target for 2020, and how much of it is at risk?
To remember, we have a total commitment of 14.1 GW for the new plan, and it is well addressed, and it doesn't change. We have now 65% of this commitment, of this delivery, under construction or ready to build. The target for 2020 is 4 GW. Here, we could have some reshaping of 2020, some delays that will reshape 2020 and 2021, but it's a matter of not more than two months for a certain number of megawatts. It depends really on how the crisis will develop in the next months and when the lockdowns in the different countries in which we are developing capacity will be changed or will be prolonged. The overall target of the plan is unchanged.
Do you foresee any impact to your pipeline?
No, no material impact. We had some issues related to the negotiation of some permitting, so some delays in permitting, but nothing that is meaningful or affecting the rate of development of our pipeline.
Still linked with the development of renewable, are you facing any bottlenecks on capacity delivery, permitting, licensing, supply chain, logistics, or construction?
I said permitting, supply chain situation is not critical. On the construction side, we have picked up some delays in the lockdown, and now we are going to recover these delays. As said, some little reshape of the schedule of activities might arise in some countries, mainly focusing on Spain, Brazil, and South Africa.
We move specifically on Spain. Possible restart of renewable auction in Spain. Any discussion with the government after it confirmed the target of the PEEC for 2030?
No, we have no sign that there would be change in the draft of the law climate change. We think that next auction in Spain, the ministry will push forward with new auctions once the situation will stabilize. The last news on this, the ministry has just launched a new renewable auction in the Canary Islands, and we expect to open about 150 MW. The same is due to be done for the Balearic Islands. These are signs that the recovery will be focused mainly on the renewable development in almost all the countries in Europe.
You keep on saying you have little disruption to your activities. What has made your projects more resilient than for other developers?
As I know, I talk about myself, about my company. We think that we rely on three main drivers. The first is our scale, and this is coupled with the wide geographical diversification. This allows us to surf the crisis and to try to have different timing and different push for different countries that are in different situations. The second is the flexibility to our capital allocation and a deep pipeline that gives us the possibility to fine-tune and reshape CapEx. The last is the widespread digitization of our asset base and operations. Our renewable asset base is fully digitized and can be remotely controlled and managed. We have almost all the applications for renewables and also for the other processes of our group, 100% in cloud. This provides us the possibility to operate plants from different parts of the world.
This is the flexibility that gives us the continuity of services and not a disruption in any situation that might occur.
Okay. Quite an articulated question around the EU. There has been hope that the European Union might prioritize renewables in its post-crisis economic stimulus efforts. What specific measure could the European Union take to stimulate renewables? For example, greater subsidies, lower taxes, easier permitting?
Yes, it's an articulated question, but I think it's a very relevant one. You know that we are full in the European Green Deal. We are fully supporting the European Green Deal. We think there is an excellent framework not only for the direction of the new effort, but also for the restructuring plan. It's clear that we think that for the key initiative, an acceleration of renewable development will be centered in the new recovery actions based mainly on three pillars. One, new capacity with short time to market. The second is the repowering and refurbishment of existing capacity, very relevant, and also with a lot of investments ready to be done. The replacement of coal with green technologies. These are the three directions we think are very relevant.
Talking about enablers, we think that simplification and harmonization at EU level of permitting procedures for wet plants, coal-to-gas and western storage, and modernization of hydro plants would be fundamental. State aid and rules and new financing instruments should be driven by sustainability and long term while boosting development or ready-to-build projects. We see sustainable finance as a combination of all those forms of capital that accelerate the achievement of SDG, of sustainable development goals. It can contribute to the generation of environmental, social, and financial value. The recovery fund, now that is due to take off, this recovery fund could trigger the scale-up of sustainable investments in our region through interest subsidies to reduce cost of debt for sustainable instruments, regulation and standardization to improve corporate access to sustainable debt, and temporary equity partnerships to reduce corporate need capital.
Improve corporate capital returns pave the way to boost sustainable investment in Europe and to rely with this push on the big part of the relaunch of Europe in the next month.
Okay. A completely different subject, more about competition. Do you think financial difficulties at oil companies might mean they are no longer able to compete aggressively in renewables, or might it prompt them to be even more aggressive in a bid to speed up their move away from oil?
I think that the magnitude of growth of renewables is so huge that also before this crisis, there were days to accommodate a vast number of new entrants. It's a market that for the next years, there's no limitation. It's so big that our company, that is the world leader in renewables, has only 3% market share, as you already said. We didn't see before, and we don't see now, no major changes to this, even a scenario of more aggressive move away from oil. In a case or another, we think for the foreseeable future, the market is so big that there is space for big competition without major price or margin compression.
Okay. The next is on the short position. Can you provide details on the short position? Are you expecting to benefit from these also in Q2?
Okay. First, as you know, we have this long position mainly in Spain, and the drop in full price implies a positive effect with the short position. Now, this is for the first quarter. Entering the second quarter, contribution will depend on the evolution of electricity prices. We saw another swing down in April, and it has been a positive impact in April. For the other month, more or less, the prices were almost flat or a little bit increasing, and the increase in prices reduced the magnitude of the short position gains. We will continue to manage the position, and we expect to benefit from it in a context of a lower oil price. Now we have to experience what is going to happen to oil prices in the phase two of the interim phase.
Okay. On balancing service, can you quantify the impact of balancing service? Will this extend to Q2?
Balancing service has contributed to the margin mainly for Italian global power generation, and the contribution was around EUR 290 million first quarter, EUR 50 million up versus previous year. The increase was mainly based on the fact that the system has and still has difficulties in rearranging models to understand what kind of balancing is needed in a situation in which you have industries closed and people living at home. In this case, in this phase, you have an increase in demand of balancing services, and this is why we got this increase. Expectation for Q2 is that balancing services will follow the same trend of Q1, and then the amount will depend then on the development of phase two. If normalization will come suddenly, needs of balancing services will go down. If normalization will come slowly, this need will be higher.
It's something that we will assess better looking at the trends in the 2nd Q.
Okay. Does the performance in conventional generation change the schedule for capacity closure?
No. The changes, strategies are affected by market shenanigans. It's something already taken, and it's following the developments and all the steps that we have to follow to have the complete shutdown of coal plants.
Now, we move to a set of questions about networks. The first one is a decrease in volumes is the following. Decrease in volumes does not affect remuneration in Italy and Spain. Is cash flow impacted? What is the projected impact?
Italy, reduction of distributed volumes does not have any impact on Q1 cash flow. We have a drop of approximately 4% in the energy distributed, and we may face limited negative impact at year-end because there is a quota of transportation fees that might be not cashed in from third-party traders. I remember that for as it Italy works, what you did not get in the year, you will get in the next year. So everything that we will not get in the transportation fees in 2020 will be cashed in in 2021. In Spain, the reduction of distributed volumes does not affect cash flows at all.
Okay. Then, networks in Italy and Spain, how are they impacted if consumers do not pay their bills?
Okay. Italy, regulator, they do not issue any resolution that exempts the traders from payment. It is possible postponement according to the liberals 116 and 149, and the regulator is expected to define timing and recovery mechanism in case of clients that do not pay the bills on time. This resolution extends the effects of the previous one and envisages the possibility to partially postpone the payment up to 30% of the invoicing related to consumption points. Generally, the cashing from ended contracts are covered by recovery mechanism of system fees, as I have already said, so that are in other resolutions. All this mechanism will be completely cashed in between this year and the next year. In Spain, the Royal Decree 11 approved all of some customers, small businesses, and enterprises to temporarily suspend the payment of their bills for six months.
The retailer must pay the energy revenues to distribution companies after this period. Therefore, there is no impact estimated by the year-end. Today, we have an impact that at the end will be fully reabsorbed for the year-end.
Okay. LATAM, LATAM's volume impact, what has been so far, and what do you expect for the year-end?
During the Q1, we had roughly 1.5% decrease in distributed volumes. We think that it will depend on how the COVID will impact these countries. Today, we have an expectation to end up with a minus 2.5% the full year result. That means 3.5 terawatt hours.
Okay. Staying in LATAM, what measures have regulators taken to affect the crisis impact?
Regulators are looking to implement a wide range of response measures, adapting to solutions to facilitate the economic situation of customers and smoothing the impact on distribution companies. In South America, regulators' institutions are activating special funds or liquidity payments facilities to provide financial resources for the regulatory interventions that will support the overall system. We are closely monitoring the development of this supporting mechanism to understand potential impacts deriving from the unfolding COVID situation. Regulatory authorities decided also, in some countries, the postponement of all inspections and sanctions procedures in charge of distributors related to quality of service. This is an important impact because of the impossibility to manage properly the network and also the quality of some networks that we manage in Latin America mainly.
Okay. We move to retail. Can you provide more color on margins for B2B and B2C for both Italy and Spain?
Okay. In Italy and Spain, no relevant impact in margin because of COVID crisis. We have a reduction on the B2B gross margin, and that is due to lower volumes, but it's quite completely offset by positive impact on B2C gross margin. That's because the unitary marginality is completely different from the marginality of B2B and B2C. The two things that we're standing, we have a big decrease in volume B2B and an increase in volume B2C that is lower compared with the B2B. For the different composition of unitary margin, the impact on overall margin is neutral. This is something that is the same more or less in Italy and Spain.
Okay. Next, what is the demand evolution you have experienced? Is it showing any recovery? What can be expected for Q2 for Italy and Spain?
We had the first decrease in Italy and Iberia in the first quarter, mainly for the restriction that affected more or less two weeks of the Q1 results. We expect a further reduction in Q2 with the lockdown because we had a complete shutdown in April, and then we have a hypothesis of recovery in May to June. This is seen to be roughly 5 TWh in Italy and Spain of lower demand in the second Q. We have seen a recovery in consumption, in particular in corporate segments in Italy and Spain, just right after the phase two beginning that was at least already higher than expected. We have good signs in terms of recovery of demand in the second phase.
Okay. A few questions around financial management. Worsening of working capital of around EUR 400 million in Q1, what is the working capital poised to be at year-end? When can it be reabsorbed?
The expectation we have is to reach roughly EUR 2 billion of temporary impact on working capital as an increase in working capital at the peak of the crisis. We think this peak will be reached within the end of the second Q and the beginning of Q3. We think that half of this amount will be potentially recovered by year-end as the situation will normalize.
Okay. More technical on working capital. Receivables within working capital. At which point do you conclude the customers will never pay and write off the receivables in earnings? Three months, six months, twelve months?
This is made in accordance with IFRS 9 guidelines. Recognition in the profit and loss of the no payment of the customers will have an impact due to the accrual of that debt according to the loss rate of each country. Regarding the write-off, it is a different thing. It is important to remark that it depends on each country's local regulation and the execution of all the previous steps in order to support the operation. Taking this into consideration, the average term of this loss recognition is between two to five years for Enel Group countries.
Okay. Now, what is the impact on your bad debt provision, and what are the measures that will be implemented in order to recover it?
We expect an increase in the level of bad debt as local regulators have stopped done negativities and have closed physical collection channels in some countries. The magnitude of the increase will be a function of the timing of the lockdowns and the pace of recovery when the situation will normalize. Key drivers to smoothen this impact will be forward more towards the digitalization of payments, and this is something that we are doing to try now to move a lot of people on digitized payments. All in all, we think that the bad debt, so we do not know how well the recovery phase will be, but as a first assumption, we think that a 15% increase in bad debt versus the normal 15%-20% increase versus the normal size of bad debt will be possible along 2020.
Okay. A recurring question on taxes and new taxes. Now, governments are in need for cash. What is the mood in Italy and Spain towards increasing taxes to the sector?
I don't think there are any upcoming risks for government intervention. I think, on the contrary, that governments might push to stimulate the economy, and the utility sector can play a central role because the investment into sustainable activities will address two important things: to have a short-term investment increase on one side and, on the other side, addressing the sustainable path that, mainly in Europe and also in other countries, is the main task for recovery.
Okay. We go back to the business with a set of questions that are more, say, ex-COVID topics. We start from renewables. Are you expecting any portfolio rotation on renewables for 2020?
No, we don't expect any major portfolio rotation on renewables.
Okay. Another really dedicated question on renewable. Headlines suggest you are seeking a JV partner in Africa. What is the current status of the JV initiative, and how quickly could we see progress in signing agreements and adding gigawatts?
The process is in place, and it is also at an advanced stage, so we are confident that we can sign agreements before year-end. The Africa Development Regional Venture is part of the additional growth projected for 2022, and so it's clear that the addition of gigawatts will be also dependent on the region and how the region will address the rate framework in the coming months.
Okay. Now, on hydro availability, how has 2020 been so far for hydro availability, and what is the expectation for the full year?
Talking about hydro resources, resources in the first quarter have been quite poor. Hydro generation in Q1 has been very strong thanks to the reservoirs. We think that the full year expectation is aligned to the trend experienced in Q1, so we will have a strong production based mainly on reservoirs. We think, with the exception of some countries, that at the end we can stay at the level of reservoirs of the beginning of the year and having done the production expected.
Okay. On conventional generation, can you provide more color on efficiencies recorded over the period?
Here, so EUR 30 million is in progress. It is clearly based mainly on employees on one side because we moved employees to other more efficient ways out of the coal plant and also external costs. The vast majority is the efficiency program that pertains to the shutdown coal plant programs that we have in progress.
Okay. Staying on conventional generation, any progress on hedging for 2021?
Yes, you have also in the annexes the situation today, but we have progressed our hedging. Now we are ranging at 50% 2021 production hedges in Italy, 80% for Spain. We have now an average hedge price of EUR 52 in Italy and EUR 75 in Spain, with Spain EUR 75 included also the marginality on retail. This is more or less the situation today. We are moving, notwithstanding the very low price, the spot level, and we are finding space to cover 2021 almost in line with the level of the business plan.
Okay. Networks, what is the outlook for regulatory frameworks across countries of operations?
I'd say neutral to positive. It's clear that a big discussion now is going to be done in Europe and also in other countries to discuss about the central role of distributors in the energy transition. Also, this will be the center of an increased investment plan that could be triggered by these recovery needs. Renewables and distribution can be a big basket of increased investments in Europe and also in other countries. It's clear that in Europe regulators are trying to understand how regulatory principles will converge among the European countries, and it just happened in Spain with the revision of your regulatory framework. It also happened in Romania, and we are just by meter now roll out as being planned for the next years.
On the other side, also in South America, regulatory frameworks are moving towards European schemes, and regulatory authorities are stabilizing initial step also here for smart meters. We see a normalization. We see discussion around the central role of distributors in the energy transition, the fact that networks will need higher investments to get this role, and on the other side, to try to decrease step-by-step remuneration on networks at the time in which investments would be needed and will have to flow in the networks in all the countries in which we are and also in all the countries that are addressing the energy transition.
Okay. Staying on networks, is there any regulatory risk to be taken into consideration?
Not in the foreseeable future. New regulatory cycles have just started in Spain. New tariffs have been defined in Colombia, and they are all aligned with our expectations. In Chile, regulatory authorities are working to define elements for the new cycle that will start in November 2020, and we expect the result to be close to our expectations. These are the outcome of the first discussion we are holding with the regulator.
Okay. Retail, how did the commercial portfolio change over the first quarter in terms of customers acquired and lost?
Italy and Spain, customer base is up by around 200,000 customers, driven by solid performance in Italy and Spain that remained broadly flat over the period. On the other side, on the customer loss, more or less in line with the previous quarter. For the first quarter, the expectations are that the market will go is going down in terms of acquisition and in terms of lost customers during the lockdown. That is something that we are experiencing along April and along the last two weeks of March and along the month of April, where all the activities of acquisition have been suspended or very, very reduced.
Okay. Quick question on retail, what's the level of churn rate?
Churn rate in Italy was roughly around 12%. In Iberia, the churn rate declined 1.1 percentage points versus the previous year, and we are working around 10%. This is also because the reduction that we will see in the second quarter will be bigger because of the lockdown of April that will impact the churn rate, reducing a little bit because of less lost customers in April mainly.
Okay. Now we move to a set of questions that I think are the most burning one, more related to general financials. The first one is looking at the guidance. What are the main threats to your full year guidance, and what can be the financial impact?
Okay. First of all, I want to underline that this crisis is peculiar. It might result in lots of moving parts, both positive and negative, and we are closely monitoring to ask promises. If I have to summarize the main headwind that we are seeing at the moment, we have devaluation of local currencies against EUR, and based on current FEC projections, it might have an impact on EBITDA of around EUR 500 million. This might translate into a net income impact of around EUR 150 million out of the EUR 5.4 billion target we had in 2020. Impact of volume exposure in LATAM will depend on regulatory protective measures that would be made available by local regulators. This is for LATAM because in Europe, regulated activities are not exposed to volumes as frameworks are very limited.
Another headwind will be bad debt that potentially will increase, but the final number will depend on how long the lockdown persists and how quickly the economic recovery materializes. Regulators also might have to recognize this cost and therefore neutralize the economic impact. We have to make a longer observation of all these things to understand what the final bad debt impact might be. Next three months and recovery curves in countries of presence are key to properly assess positives and negatives on numbers. As of today, we can confirm that the underlying weakness continues to prove really solid, and the strategic trajectory of the group is well on track. Monica, I guess you are on mute.
Sorry, I put myself on mute without remembering it. Cost of debt is down by 55 basis points versus 2019. Can we expect a steeper reduction versus planned assumptions?
Cost of debt Q1 was 3.9%, and it has been in line with our planned assumption for 2020 of 4%. We have limited refinancing ahead of us, and we will continue with our active liability management activities. More or less not having big refinancing in the next quarter, we think that we will stay stick to the targets that we have taken in the strategic planning.
Okay. A really popular question on the provision reversal in Spain. Can you provide more details? Was it included in the 2020-2022 plan?
Okay. This is a new collective agreement signed last January, and it provides for a new and more flexible social benefit scheme. It establishes a modification of certain social benefits, mainly that corresponding mainly to electricity subsidies for active and passive employees, now more aligned to the average family consumption in Spain. The provision reversal was included in the plan, and negotiation with the unions on this collective agreement were ongoing by the time of presenting the strategic plan 2022 last November. It is clear that this impact might not be the final impact of this reversal provision because other measures are going to be taken in Spain, and one has been already taken in the first quarter.
Other provisions to have flexibility in managing other costs or so the personal costs will be taken accordingly with future agreements with unions that are now progressing, and they are now discussing [audio distortion]
Okay. Another question more on the non-organic part of the business. Has your outlook on M&A changed as a result of the crisis? Do you think it's prudent to pause acquisitions, or could this actually be a good opportunity to do deals at attractive multiples?
We have no change in the approach of our M&A approach. In the preference, we have for bolt-on mid-size deals, mainly on networks because of renewables. We think that we can rely on our organic capacity to develop our fleet. I think current crisis now is putting a break on M&A in this period, difficult now to press from any part an M&A during the lockdowns and recovery. I think that current crisis will potentially open up opportunities, mainly for who has big financial shoulders. I think that to the year end, it will be possible to identify those players that managed through the crisis and those that did not. Yes, financial difficulties may trigger asset sale or consolidation of players that in turn can bring assets to the market.
We think that a new phase of M&A will arise, not now, but in the last part of this year. We will be looking at the market, and we will evaluate opportunities and be ready to capture some opportunities, as always happened in the past.
Okay. Staying into non-organic, how is the minority buyout progressing in South America?
We are well advanced in the program, supported also by the weakening of FX of the LATAM currencies. As you know, we have launched share swap transactions on both in Americas and in Chile. On Americas, we expect to complete the outstanding share swap and reach 62.3% by May 2020. We have already entered into two new share swap transactions to reach 65% of our stake. In Chile, we are progressing well, and we will announce shortly the outcome of the share swap transactions that we have in place.
Okay. Now, two questions on the upcoming AGM. Considering your current share price, is it likely to have a share buyback as soon as the AGM will approve it in May?
In March, the board of directors asked the AGM to renew the authorization to purchase and subsequently dispose of treasury shares to be carried out in one or more transactions up to a maximum of 500 million ordinary shares of Enel that represent about 4.9% of share capital. We already expressed that this is at a value of around EUR 2 billion. As we have always said, we have elected to retain this optionality, but it will always be benchmarked against other options for capital deployment and the value accretion that is attached to them. All in all, as I said, always looking forward, it's clear that these opportunities stay in the basket.
Looking at the prices, for instance, the prices at which we are doing the share swap in Latin America, it is more EPS accretive to devote capital to this kind of transaction than this one. We will benchmark, and we will rank all the opportunities, and we will decide to deploy capital on our strict financial discipline to give money to options that are the best in the ranking.
Another really popular question: Is there any risk on dividend payment?
There are no risks. Now we have the board approved the payment of a dividend equal to EUR 0.328 per share. In 2019, EUR 0.16 already paid as interim dividend. The balance to be paid in July. We confirmed the current dividend policies, not only for what is the payment for 2019, but also for 2020, where we set the minimum payment, minimum EPS at EUR 0.35 per share.
Okay. Now, two questions on the remuneration policy. Can you provide more color on the rationale of the recent changes to the NBO and LTI program?
The rationale was clearly the fact that after having set NBO and LTI programs before the crisis, crisis has changed priorities for 2020. Priorities for this company in 2020 are now more set on the stability of the service on one side and on to make our employees safe in working for the stability of service. This is the bigger part of the effort that we are doing. The board decided that it was right to put this as the priority that this management has to follow in 2020. On the other side, because the sustainability effort that was already in the LTI program because of the emission and was set for the renewable development has been defined as a big important and relevant target for the medium term for the LTI fund. This is because it is unchanged.
It is not because some delays might arise in 2020 that we have room to reduce this effort in the medium term. On the other side, also to underline that these kinds of investments will have to be the key for the restarting phase, not only for us, but also for Europe or for the countries that will need to take two things together: the restart on one side and a big step towards sustainability and energy transition. This is the main philosophy under this change of target.
Okay. Before going into the list of questions that keeps on going through our inbox, coming in through our inbox, one question that is again another really popular question is on Open Fiber. If you can just share with the market updates on possible merger, sale of Open Fiber.
As I said, I think priorities in this period have changed. The real priority the company has is to provide continuity of service on one side and to speed up in the development of this project because it has been proven central in a crisis like this. I think after this, the central role of fiber optic in a country will be more and more important because also it is the way in which we will work, the way in which we will act. I think this crisis will change completely the things and new needs that will arise. These needs will stay to have a future-proof network like the one Open Fiber is developing. This is the real focus of the company. We have no signs of any steps in other direction. The company is fully busy in doing this thing.
Okay. I would pick a few questions starting from the beginning. I will try to be in order, I will try to pick them up orderly. The first question that came through was on the working capital in the first quarter due to COVID. Can you elaborate on that? Can you please provide guidance for Q2? I think that we have already addressed this question. Popular question on the provision release at Endesa. Basically, some analysts are asking if this release and the inclusion of this release in the ordinary results is an implied downgrade of the guidance that we provided last November, or there are some items that will go through and will basically potentially offset this impact at the end of the year.
I think I have already answered the question. I said this is the first step. The first step was a release of this provision on one side, but we have also put another provision that is going to cover some agreements with unions related to personnel on field, on distribution, on generation that we have already had. What we think is that a lot of other things will be needed in Spain because Spain is entering, like the other countries, in this energy transition phase. It is going to shut down the whole plants. It is going to digitalize the networks. Now that the fireworking is coming at a very big part of the new way of working. These are things that Spain will have to discuss with unions in the next months.
That is why the final impact, economically speaking, at the end of the year will not stay at that level because other provisions will arise following the discussion that they are doing with unions in this month.
Okay. I'm going through quickly the question that came through. I think there is a question that we really didn't answer, although you were clear in assessing the commitment of the group on the 2020-2022 targets, but it's linked with our SDG bond. The question is, do you expect to hit the KPI targets on your sustainability-linked bond despite the slowdown in the renewable industry?
Yes, definitely. We do not see, so looking at what we had this year, we might have this year. Also, now we are entering phase two, and we will not come back to phase one. Looking at this normalization of activity, everything, the maximum impact we might have is two- to three-month delays in some of the development of 2020 that will translate in, that will move in 2021. The overall KPI is not impacted today at the visibility we have today.
Okay. We have some questions that I think have been already addressed. If any were left behind, we will do it via email. I think this can conclude our call perfectly on time. Thanks, Alberto. Thanks to all of the people that were connected and that continued to support us. Let's talk soon. Thank you.
Thank you very much. Bye-bye.
Bye.