Good afternoon, ladies and gentlemen, and a warm welcome to the Q1 2020 results presentation, which will be hosted by our CEO, Jose Bogas and the CFO, Luca Pasa. Following the presentation, we will have the user's Q and A session open to those connected on the call and on the web. Thank you. And now let me hand over to Jose Bogas.
Thank you, Mara, and good afternoon to everybody. Let's start with the main highlight of the period. In the Q1 2021, we had faced a complex and turbulent market context in which we have managed to achieve And EBITDA is slightly above €1000,000,000 in line with our 2 year guidance announced back in November last year. The investment in digitalization undertaking in recent years and the provision booked So far devoted to coal fleet accelerated closure and digitalization have allowed for a high degree of operational efficiency. Clear evidence of our progression in reshaping our company towards a cleaner and more sustainable business approach Is delivering more than 90% of our CO2 free output on mainland, while all of our bank debt was linked to sustainable metrics.
Our active management of current assets and liabilities has allowed us to deliver a sound cash generation, Doubling operating cash flow when compared to the 2020 Q1. And finally, the 2020 shareholder remuneration proposal, Which is the highest since 2014 was approved at our recent AGM, a final dividend of €1.3136 per will be paid on the 1st business day of July, which on top of the €0.7 per share The interim dividend already paid in January represents a 37% increase versus last year. Moving now to Slide number 3. In terms of ESG, 2021 will be a turning point for Endesa. The acceleration of the coal fleet closure has allowed us to exceed 20 And 'twenty three CO2 emission free output targets 2 years in advance.
Further proof of our strong commitment to decarbonization With the recent approval of the AGM complementing the variable senior management remuneration With the renewable deployment during the timeframe of the current plan. Concerning the social aspect, we firmly believe On the commitment to alleviating the needs of the most vulnerable group. In this sense, Endesa And the Catalan government agreed to write off energy debt for more than 35,000 vulnerable families. Within the secular economy objective under the European Union Recovery Fund Framework, we have presented 17 projects For a total of €3,600,000,000 for this initiative, 40,400 new jobs could be created. We have also achieved a further step forward in our plan to promote gender diversity with the presence of women In position of responsibility reaching over 36% of Director on the Board from the former 30% and well on track to reach the announced 40% by 2022.
I would like to point out that regarding home safety, It should be noted that Endesa's continued effort to protect employees and contractor in the work environment. The combined accident frequency rate on our own workers and contractor has improved, confirming the downward trend recorded for many years now. The deployment of all of our initiatives and the integration of the ESG scope across all areas Has been recognized by the most prominent ESP rating worldwide, Endesa has recently Being included in the top ranking position by ISS Quality Score Index. I would like to comment on the evolution of the scenario over the period on Slide number 4. Q1 of 2021 clearly shows that electricity demand in Spain is still far from recovering from the effects of the pandemic.
Despite the cold waves, especially this winter, we have seen one of the most hesitant Q1 in recent Thanks. Mail and power demand has increased by 0.6%, but decreased minus 0.4% adjusted by calendar and temperature presented. Likewise, in Endesa's concession area, gross demand has slightly increased by 0.4% in non adjusted tariff and 0.1% in adjusted tariff. These figures are mainly driven by the drop In Industry and Service segment, partially offset by the increase in the residential sector activity. As far as prices are concerned, the 30% increase over the period mainly stems from the effect of lower temperatures due to the Filomena story in January, which can be clearly seen in the chart as well as the rise in gas references.
Let's move now to Slide number 5, where thanks to continued effort on decarbonization, mainland renewable Capacity represents around 45% of the total. We're on track to reach the 62% target set out in our business plan. Likewise, CO2 free resources constitute 64% of our installed capacity in the peninsula. As a consequence of the coal phase out process, today's thermal generation represent just 9% of the total mainland production, mostly from CCGTs, a decrease of 21%. This means it has allowed us to reach a renewable output of 4.1 terawatt hour, 14% increase versus the Q1 20 70 3 percent of this production increase is due to the combination of new wing capacity, which came on stream At the end of 2020, higher load factors.
Emission free production boosted to 91% of the mainland total output already exceeding the target set for 2023. On Page number 6, let us now focus on the main driver supporting our ambitious to grow in renewables. We continue to maintain a constant effort to feed our renewable project pipeline, which is key to Achieving our ambitious 2,030 capacity development plan, our growth pipeline was boosted 24.4 gigawatts from 41.8 announced in the full year 2020, out of which around 15% As TSO awarded connection points and 2.3 gigawatts under execution, Considering the latter project and the mature pipeline, solar technology weighed 70%. All of these provides comfort to be well on track to meet the 700 megawatts of renewable capacity target in March 2021 Endesa acquires a photovoltaic portfolio of 119 megawatts from the Spanish developer Arena Power. Total CapEx, including acquisition and construction, will amount to €350,000,000 Regarding storage project, we have built up an important pipeline of 6 gigawatt in batteries, out of which 0.4 gigawatts are already in our mature pipelines.
When it comes to electrification on Slide number 7, total energy sold dropped by 3% quarter on quarter As a consequence of the COVID impact on economic activity, this last quarter has been fully affected, whereas in the Q1 of 2020, It impacted barely 15 days, but also the high competitive intensity in the market, the labor Effect of 2020 being a leap year and the different Easter holiday period must be taken into account. By segment, the most affected is B2B minus 9%, hit by the economic deceleration due to the COVID impacting industry activity. B2C sales showed an increase of 10%, mostly as a consequence of the low temperatures due to the Filomena store and the still important home working mode. Total power customer decreased by 1% or around 110 1,000 of which 63,000 in the free market due to the strong increase in competitive intensity. At the same time, we have been putting in place a number of commercial strategies for both the B2C and B2B The sectors helping us to repair this trend.
Our approach is based on our client knowledge And an increasingly sophisticated range of products and services aimed at retaining and attracting higher margin clients through increased value proposal. All this is possible, thanks to the digitalization investment carried out by the company in the last years, the performance of the commercial channels and the continuous focus on efficiencies. Regarding electric mobility, we continue to deliver on our deployment plan of charging points, reaching a total of 7,500. This continuous effort enables to maintain our leadership position in Spain with more than 2,000 Regarding our energy management in Slide number 8, the unitary integrated margin resulted In €30.3 per megawatt hour, a 12% decrease versus the €34.3 per megawatt hour of 2020, While electricity sales in the liberalized business are down by 4%, minus 0.7 terawatt hour. This margin normalization was already anticipated and in line with the business plan expectation of €29, €30 per megawatt hour in 2021, moving to €31,000,000 in 2023, baked by higher stake of renewables in our mix and better market condition as COVID fails.
The main factors Behind this margin decrease were lower generation margin, mainly due to the application of the new Catalan tax And lower OTC references, the absence of the positive effect recorded last year around the effective management of the short position versus a flat situation in this quarter And the supply margin almost flat, having a better sales mix with a slightly higher unitary margin, Mitigating lower sales and higher ancillary service costs. Regarding forward sales, we have hedged For 2021, 97 percent of our estimated price driven output at a price of around €71 per megawatt hour. Once we consider our total sales mix, the all in revenue that is including index energy We reached €67 per megawatt hour. For 2022, hedge volumes stand At over 60% at a price around €74 per megawatt hour, all in all price and the estimated all in revenue We'll be similar to 2021 once all of the estimated price driven output has been hedged. And now Let me hand over to Luca Pasa, who will give you the financial results.
Thank you, Pepe, and good afternoon, ladies and gentlemen. Let's now have a look at the financials of the period down on Slide number 10. Reported EBITDA stood at €1,019,000,000 decreasing 31%. On a like for like basis, Once netted from the last year personal provision effects, the EBITDA would have decreased 9%. Net ordinary Net income dropped by 41% year on year, reaching €491,000,000 13% lower deducted the first Quarter 2020 provision mentioned above.
Funds from operations reached €583,000,000 doubling last year of reference. Finally, net debt increased to €7,500,000,000 up plus 9% versus full year 2020. Moving to the detailed analysis of the like for like EBITDA on Slide number 11. Let me now briefly set out the main drivers. As already commented, like for like EBITDA stood at €1,090,000,000 minus 9% versus Q3 2020.
Generation and supply EBITDA decreased by 16% to €462,000,000 mainly affected by the market conditions impacting in the business as well as we will explain later on. Distribution EBITDA declined 3% at €476,000,000 Finally, non mainland generation EBITDA remained stable at €81,000,000 Moving to a deeper analysis, we are now on Slide 12 On the regulated business, like for like EBITDA decreased by 2% to €557,000,000 With a lower gross margin, partially offset by a 13% reduction in the fixed cost. Distribution margin decreased by 3%, Mainly due to the application of the new remuneration parameters of the 2nd regulatory period, the non mainland generation gross margin fell by 15%, Negatively affected by demand drop associated to COVID, the absence of the positive regularization from previous years recorded in 2020 And the lower remuneration in the new regulatory period, partially offset by better fuel and CO2 compensation. Fixed costs were €26,000,000 lower once deducted the net provision release effect of last year, mainly due to the lower maintenance costs in the islands. Moving to the liberalized business on Slide 13.
EBITDA reached €462,000,000 16% decrease with 5% of lower gross margin And 15% increase in the fixed cost on a like for like basis, mainly as a consequence of the positive update of workforce provision booked last year. The liberalized electricity margin amounts to EUR 766,000,000 Being positively affected by the recognition to Endesa of the right to be compensated for the CO2 clawback in 2,006 for €188,000,000 booked in 2021. In addition, as mentioned before, it has been negatively impacted by the new Catalan AXA in force since 1 July 2020, the absence of the positive results in the short position booked last year And by lower OTC references. Supply margin remains very flat with a slightly higher unitary margin Overcoming lower sales and higher ancillary services costs. Energy Power gross margin reached €103,000,000 Plus 26%, thanks to the new capacity in place and a 36% increase in the production.
Gas gross margin fell €64,000,000 in Q1 2021 to €11,000,000 mainly affected by the negative mark to market delta of €61,000,000 due to the steep amount of gas prices, triggering this opposite non cash effect. We expect this impact to be diluted or fully neutralized along the next quarters as the contracts are being settled. Excluding this mark to market impact in both quarters, gas gross margin is aligned to guidance. EndesaX Contributes with €30,000,000 of gross margin, minus €5,000,000 versus Q1 2020, mainly due to the perimeter effect. Moving now to the next slide, more details on the evolution of fixed costs.
Total reported fixed costs reached €513,000,000 4% increase on a like for like basis. Once that the non recurrent FX, as the update of provisions for workforce restructuring plans in place, indemnities and tax and labor related risks, Fixed costs would have decreased by 3% due to the several efficiency plans booked in previous years that will further contribute to the full year results. Moving now to Slide number 15 on the P and L evolution from EBITDA to net ordinary income. G and A increased by 13%, explained by the higher amortization made in renewable and distribution, The negative delta resulting from the reversal of the coal impairment book in 2020 and a slight increase of €10,000,000 embedded provisioning, partially linked to COVID pandemic. Net financial results were strongly affected by the financial revenue from interest Trade for late payment in relation to Endesa right to be compensated for the 2006 CO2 clawback.
This was partially offset by the financial update of workforce and its monthly provision, while rates Increased by 0.91 percent in the Q1 of 2020. In the Q1 of 2021, rates remained almost flat. The effective tax rate resulted in 24.4%, slightly higher than last year and aligned to the business plan expectation, And this has been the consequence of lower tax deductions in the Canary Islands. On the bottom line, net ordinary income decreased by 41% over the period, Minus 13% on a like for like basis. Moving to cash flow on Slide 16.
Funds from operations increased by 111 percent year on year, reaching EUR 583,000,000 due to the following effects: Lower EBITDA after provision paid of minus €471,000,000 out of which €356,000,000 are explained by the net provision reversal booked in the Q1 2020. Working capital and others improved by 71%, Mainly thanks to the above mentioned net provision release in the Q1 2020, the improvement of our regulatory receivables, A lower net balance of receivables and payables accounts and lower inventories, the effect of derivatives and other non cash provision. Income tax paid amounted to minus €2,000,000 versus plus €74,000,000 in the previous year, mainly due to the €73,000,000 corporate tax refund corresponding to fiscal year 2018. Cash based CapEx, 16% lower than the previous year, Also, let's free cash flow to positive €158,000,000 in this period, €390,000,000 higher than the Q1 2020. Let's now have a look at net debt on Slide 17.
Net debt amounts to €7,500,000,000 €600,000,000 higher than full year 2020. This increase is attributable to the payment of the interim dividend against 2020 results paid in January. The regulated working capital remains slightly below last year figures at €8,000,000 Our leverage remains stable with a debt to EBITDA ratio at 1.9 times on a like for like basis once deducted the provision effect booked in the Q2 2020. It's worth highlighting the extraordinary low cost of debt, which is maintained at 1.7%, marking historical minimum And place Endesa as the European utility with the lowest cost of debt as well as the increase in the coverage of debt maturities to a very comfortable 35 months. And now let's take a deeper look in our sustainable finance on Slide number 18.
During the Q1, Endesa has continued to deploy Our intense activity in sustainable finance with €2,800,000,000 in new sustainable linked transactions In this assigned Credit Alliance for an aggregate amount of €2,100,000 with 11 leading financial institutions, meaning that All of its liquidity bank facilities are linked to an SDG criteria. We have also reached a new milestone by linking €150,000,000 7 year bank loan to our new SDG KPI of scope 1 with greenhouse emission reduction. Sustainable finance now accounts for almost 50% of total gross financial debt versus 45% December 2020 right on track towards the 60% goal in 2023. With the official 2020 award to the best sustainable loan, we Our leadership in sustainable finance, developing innovative structures, applying to a wide range of instruments and engaging a significant portion of our financial and commercial counterparties. And now let me hand over to Pepe for his final remarks.
Sorry. Thank you, Luca. To close this presentation on Slide 19, I would like to share some final remarks on our performance during this Q3. 2021 guidance is confirmed Despite the exceptional condition in this quarter that we expect to normalize during the year, we keep advancing in our decarbonization And electrification process in an efficient way, lowering costs while increasing our share of CO2 free emission production. To this effect, we increased by 22 percent up to EUR 23,300,000,000 the project presented to the recovery, The transformation and resiliency plan.
Strong cash generation capacity shown during this Q3 of the year, A relevant set of innovative sustainability linked financial operation confirming our commitment and leadership in sustainable finance. In such a context, the outstanding dividend yield in 2021 is the strongest evidence of sound value creation to our shareholders. And ladies and gentlemen, this concludes our Q1 2021 results presentation. Thank you very much for your attention and we are ready to take some questions.
Okay. Thank you, Pepe. Thank you, Luca. We are now open to take any questions you may have. Okay.
The first question comes from Alberto Gandolfi from Goldman Sachs. Please, Alberto, go ahead.
Thank you, Mario, and good evening. Thanks for taking my questions. I guess the first one is, I was looking at the evolution of the customer numbers, and it looks like you're broadly down 100,000. Maybe it's a rounding just, but it's about 100,000 in the quarter, Which would be like nearly 4% annualized. So I was wondering if you can comment on the dynamics in this segment And if you have a counter plan to basically stop this from happening.
The second question is on the financial Expenses line. Can you tell us maybe without those nonrecurring elements, what we should expect for a normal Quarter should have been about €40,000,000 perhaps, euros So just trying to see how normalized would be. And last Now please, when do you think you're going to start to see the benefits from higher power prices? I guess that's a question on your hedging policies. And Just to double check, you have more than 30,000,000,000 of Some of the renewables is exposed to power prices.
So would you agree that we should think about your sensitivity to power prices for next You're at about 40 terawatt hour and growing. And I know you look at it on an integrated margin basis, but just Trying to understand when you can reprice the portfolio and see all the benefits. Thank you.
Okay. Thank you, Alberto. I will try to answer the first one, give us some ideas about the last one And then Luca to complement what I am going to have to say and to answer the second one about finances. 1st of all, with regard to the supply competition, let me say, 1st of all, that Supply margin, our supply margin in the Q1 of this year 2021 remained almost flat. With a slightly higher unitary margin overcoming, I would say, the lower sales, B2C sales saw an increase of 10%, but B2B sales decreased by 9%, as we have said.
The higher ancillary services cost linked to very special situation of the Filomena storm and also The very reduced thermal gap in February due to the very high renewable production Production linked to the very high CO2 or higher CO2 and gas prices. Having said that, It is true that total power customer decreased by 1%, that is 100,000. But in the free market, which is the important Clear for us, 60,000 customer, which is very, very important. So all in all, we have paid Q1 2021 with lower demand than expected due to the COVID restriction, But in line with last year, perhaps, these higher ancillary and low to say factor cost, And mainly due to Filomena that it's give us minus €25,000,000 And a strong increase in competitive intensity, strong increase that we saw in the Q4 of 2020 and it has continued in the Q1 of 2021. This strong increase in competitive intensity, it was produced at least in my opinion by 1 of the incumbents, which has increased its It's aggressive, I would say, doing 3 things in my opinion, 2 of them with Fence in my opinion and the other without any sense.
The first one is the brand and commercial campaigns, a huge increase. The second is high sales channels remuneration. Okay. And the third It's a price war in the sense that trying to reduce prices to the customers. And then the rest of the competitors have started to respond to this incumbent and also following Not as this first one, but following this strategy.
So we are facing a situation that I had a high probability to occur, but this appraisal. But in my opinion, this situation appraisal is never linked to an TelenorSmart Market Management. It is usually executed, in my opinion, by new entrants who normally do not seek to remain In the business, back to, I would say, extract value quickly by selling the customer base. When one of the main incumbents executed this strategy, it is usually due, in my opinion, again, to a specific Action for a shorter interest, this time or I would say to a lack of ideas Our ability to make an offer to customers that adds value to both the company and the client, in my opinion. We remain being the market leader, and we have, again, in my opinion, a very clear commercial strategy.
We are perhaps the most advanced utility in Spain in terms of digitalization, which will allow us for sure To approach our customer in a completely different and personalized ways. Therefore, we have to continue with Our medium long term strategy based on the extraordinary effort we are making in digitalization to build A future unique value proposition for our clients, personalized and adapted to their needs. However, in the short medium term, as you have said or asked, we are launching a set of actions, So our actions to mitigate the negative impact of our competitive strategy, looking for a not meaningful Deterioration of our client portfolio marginality. In that sense, we are increasing all channels Capacity and performance, looking for a greater number of acquisitions just to compensate the losses. And also, We are allocating additional resources to strengthen loyalty and retention based on our knowledge of the customer and the expansionality.
All this with our continued focus on efficiencies based on the digitalization and the capitalization Of the business should allow us to mitigate and navigate In these troubled waters, let's say that. Being honest, I think that sooner or later, and I think that Sooner than later, we will recover the very high competitive market in which we are living, But with more sense than the ones that we have had. We in my opinion, we should not be nervous. We should manage the situation, which is not easy. We should manage, but we should continue with our commercial strategy that will give value to our customers and will give value to us.
With regard to the when we are going just to benefit from the higher power prices For sure, in the year 2022, for sure. And also just because of the volatility of these prices And not only the power, but also the commodities. You should know that we have a long position In Q2, in oil, etcetera, we try to mitigate, to compensate and really to benefit from this situation. That's absolutely clear in the year 2022. And now, Luca, if you want to answer and Thank you,
Pepe. No, I'll give just the right numbers. When it comes to customer loss, it's 63,000 in the realized market and the rest, The complement 210,000 in the regulated market. And just probably underlying the thought is that we look at liberalized Customers as the main objective for us to reduce this kind of customer loss. On the regulated front, I can tell you that the trend is reversing, And this is a trend that started last year with actually the evolution of full price where tariff became the most effective tariff in the market.
With obviously full price increasing, this is already reverting and we will see the reversion in the coming months. So regulatory customers are not an For the second question, when it comes to normalized cost Of that, for us, it's in the region of €40,000,000 per quarter with a guidance in the region of €170,000,000 for the full year. And for the, say, the 3rd and 4 questions, as Pepe said, I mean, we still have about 40% of our production to be hedged in 2022. So therefore, there we will realize some of these higher prices because if you recall, we started hedging With our residential customer base and we're leaving, I would say, volumes in B2B to the latter, and obviously, B2B are more, I say linked to the evolution of prices. Therefore, this remaining 40% will benefit from higher prices.
Okay. Thank you, Alberto. The next question comes from Harry Weibel from Bank of America.
Hi, everyone. Good evening. Two questions from me, please. So first one is on the CO2 gains. I just wondered if you could remind everyone on the call the background to those.
And then I just want to check I'm understanding correctly. So there's €188,000,000 in EBITDA and €70,000,000 in financial income. And obviously, if you add that up, that's nearly 40% of pretax profit. So have I thought about that right? And Was this assumed in your guidance or is this different to what you're expecting?
So that's the first one. 2nd one, totally different topic. On the projects you've proposed for EU stimulus, so a couple of things on this. Firstly, How do you envisage returns and competition on these projects? So what kind of IRRs do you think are realistic to assume here?
And do you think you're going to see the same level of financial competition on these as you do in sort of generic renewables? And then also, if you got all of those projects funded, would that represent An upgrade to the CapEx plans that you outlined back in November. Thank you.
Okay. On the first one, so this is first of all, the numbers are correct, €188,000,000 in gross margin and about €70,000,000 of financial revenue for accrued interest. This is the final judgment of the Renaissance International recognizing and these are rights to be compensated for the reduction in the remuneration in 2,006 In the amount of the internalization of CO2 emissions rights freely assigned by the National Emission Rights Allocation Plan, the NAP, Which is basically has no local duty to be there. And that's what is the sentence that we received basically 2 weeks ago. Now the impact net income level is basically €194,000,000 which is basically deducted For the taxes and whether it was included in guidance, obviously not.
It wasn't included in guidance, but obviously, We now feel more comfortable to achieve obviously guidance including this regularization given that obviously the market context in the Q1 It's been slightly worse than what we were expecting, especially for the slow demand recovery, the extraordinary events such as the Filomena storm As well as obviously high prices in the period, which is effectively on the managing of the share position. So that's on the first question. On the second one, when it comes to basically the projects that we have put forward For the new recovery of the next generation new funds, they totaled 222 projects, €23,300,000,000 in terms of total CapEx. Now we are targeting the same returns as for other investment, I. E, if there are obviously grants to some of these businesses, they will have Basically to reach in terms of our financial target returns the same returns.
So if it's renewables and bear in mind that renewables per se Cannot be eligible for the next generation EU, but you have to have some specific features. So we have some projects Sybenoz, which are either linked to hydrogen, are either linked to the basically the right transitions in some of the Corpus Christi, we are shutting down. So there are projects in renewables, but they need to have some kind of, let me say, different features because obviously renewables are, let me say, Competitive in the market as of today without this next generation new fund. So the target returns Spread to Waco, 100 basis points when it comes to this business. And we also put forward in the region of 3 and something billion of projects in distribution.
And there is the same gain. We have a target IRR returns in distribution, which is spread towards 400 basis points. Now To the second part of this question, whether these are on top of our basically business plan, yes. I mean, we in the business plan, it's only a base more portion of these projects. So the majority, I would say, 95% to 97% would be on top.
Now the probability of us being assigned, let me say, 100% or a very high percentage of all these projects, I think, is Hello, in the sense that obviously it will be a competitive process, we understand on those that have not been made public that will be basically auctions For different basically areas for these funds, which will be obviously run By the government, so we would see it going around. But for us, let me say, even when it comes to Next Generation EU, Potentially, grant funding on our projects, we need to each have the same economic returns.
Okay. Thank you, Harry. The next question comes from Javier Suarez from Mediobanca. Please, Javier, go ahead.
Thank you, Mara, and thank you for the presentation. Two remaining questions. The first one is On the Slide number 19, where you are seeing that the guidance for 2021 is confirmed, you are mentioning as well that the Exceptional conditions in the Q3 should normalize through the year. So, would you please help us to understand what conditions you are referring to? And can you detail how do you spend those conditions to normalize and therefore to see an improvement, I guess, in the margin during the next few quarters?
That would be the first question. The second question is on the working capital and the cash flow generation during In the quarter in Slide number 16, there has been obviously a very significant improvement in working capital absorption. So the question here is that You can help us to understand if there is a managerial effort there to reduce structurally the working capital absorption We're putting the question in a slightly different terms. What is that the number evolution during the next few quarters? Is that first quarter And extraordinary thing or is something that we should see as a more recurring reduction in the absorption of working capital?
And maybe a third question, a follow-up from previous question On the recovery front, so obviously, I think that it was Luca mentioned the fact that renewables per share are not eligible. So can you help us to understand the logic behind the over 100 projects that you have presented that are eligible for grant financing And which is maybe those projects that you believe that are particularly attractive. So any granularity on Example of projects that you would be willing to finance would be very helpful. Many thanks.
Okay, Javier. Thank you very much for the question. I will try to answer the first one and then Luca will complement this first one and will answer The 2 more questions. With regard to the guidance, Well, first of all, as you know and as we have said, the Q1 of this year 2021 was a challenging quarter. As is also expected to happen, in my opinion, in the Q2 of this year 2021, both As forecasted for us, affected by the uncertainty about the speed of the economic recovery and the extreme volatility in the commodity and electricity prices.
This in our opinion, We really forecasted this and what we were waiting for is that recovery in the second half, An important recovery in the second half of the year. I should say that in demand, etcetera, we are seeing these results in this Q2. But on top of this forecast that we had, What we have seen is a weak demand, lower than expected, as we have said. Higher ancillary and load shaping Of course, due to the restriction of the COVID linked to the Filomena and as I have said, the very low thermal gas In February, a link also with the CO2 and gas prices. We have been not able just to manage The short position that we have a lot of benefits in the year 2020 due To the forward high forward and low spot prices that we have in the year 2020.
And also, we have had a negative mark to market in gas in the 2020, the Q1 of 2020 I'm positive in the Q1 of 2020 negative in 2021. So Despite of all of these, I think that we got very good results, let's say EUR 1,000,000,000 €1,000,000,000 If you compare with the Q1 of other years, 2019, 2018, 2017, 2016, Higher than this. Lower than the previous year, yes, because it was extraordinary and we had on top of This short position value that we got many other Good results in the mark to market, etcetera. So we remain Confident to reach our guidance by the year end. And believe me, this is not a win, but it's based Our view about the integrated margin ending the year as forecasted.
Also, The gross gas margin that will be will meet our guidance supported by the positive Also by the positive results from the reopening processes that were scheduled this year, We think that there will be no surprise in the regulated business. And finally, the efficiencies will arise from the Absolutely sure that we are going to reach our commitment with the market. I don't know, Luca?
Yes. Maybe just complementing on this, basically, we are expecting, obviously, a liberalized margin in the region of €2,300,000,000 for the end of the year, which is line 2 guidance, And that is based on a normalization, obviously, with a unitary margin, unitary revenue In the region of €29 to €30 per megawatt hour, obviously, we are increasing sales that are more concentrated in the 2nd part of the year As COVID impact obviously should be lower and basically no additional negatives from ancillary services, which affected us In terms of cost for an additional €25,000,000 in this quarter, obviously, considering normalization of this market for less volatility. In gas, obviously, we expect as well to meet guidance. There are also on the back Let me say, the positive results coming from the reoffers process that we are basically working on this year And the fact that obviously the flexibility of our contracts will allow us to contribute to continue obtaining additional value in the direction of shipments in other markets. We have already few cargoes already diverted this year.
So this is, I would say, working well. And when it comes to the regular part, obviously, Distribution and Ireland CPGA also are, I would say, in line to reach the targets of €2,000,000,000 €200,000,000 respectively. Concerning distribution, basically, we had a result in the Q1 with slightly below expectation due to delays in revenue for smart meters rentals as well as connection fees for 13,000,000 and this should be obviously expected to be along the year. And then finally, on efficiencies, obviously, we are expecting to reach the guidance of €1,900,000,000 of target because All the provisions that took last year should impact in the region of just slightly more than €60,000,000 in terms of efficiency this year. So that's to give Some numbers on the guidance.
On the second question regarding working capital, I would say that this was an exceptionally good quarter when it comes to Working capital and cash flow generation in general, we are expecting working capital to be basically neutral along the year, I am not adding neither a negative or positive impact, but let me tell you that managing working capital in, Let's say, a COVID environment is probably the most difficult thing for CFOs to manage. So we are, let me say, working on the assumption. But to your questions, Q1 has been exceptionally good in terms of managing our working capital. So you shouldn't expect the same performance And then when it comes to, I would say, some details for our projects that we submitted to regulatory fund, As I said, €23,300,000,000 in total in terms of CapEx, 122 projects. Geographically, I mean, obviously, the majority on Mainland, About €20,000,000,000 Then we have in the region of €3,000,000,000 on the islands and something also in Portugal.
When it comes to the type of projects, we have about EUR 3,700,000,000 in smart grids, which EUR 2,500,000 in grid automation and €1,200,000,000 resilience. And again, none of what I'm saying was included in the business plan. We have about €800,000,000 in Sustainable Mobility, about EUR 2,200,000,000 in building refurbishment and efficiency. As you know, there's been a recent approval of Tax incentive also in Spain regarding basically energy efficiency for buildings. We have and I think we Discussed this in the past, about €3,000,000,000 in green hydrogen, which includes electrolyzers as well as renewables.
And obviously, in this case, renewables are Basically supported by the next generation EU funds who are eligible. Then we have about €4,600,000,000 in storage and flexibility. Storage is eligible for the innovation front. And then another €8,200,000,000 in renewables, which again are not straight renewables, but are Either Synchronic Generation links to renewables or other type of innovations in renewables. And the majority for us are projects Linked to the basically refurbishment of the sites where we are shutting down core facilities.
And then we obviously have some others for upgrading of existing plants. So those are, I would say, more or less The areas in which we are putting our projects and obviously we have, let me say, a good understanding of what could be eligible and what could be not. And in terms of returns, I think I commented before. So that's more or less should answer your third question.
Next question from the line comes from Enrico Bartoli from Stifel.
Hi, good evening and thanks for taking my questions. I have 3 as well. I would like to go back to the guidance. And particularly, We are seeing a continuing upward trend in the power prices to the evolution of CO2. I was wondering, let's say, how safe the guidance is in this context, if this trend aboard for prices in 2021 continues.
And if you are protected in some way through your hedging policy. The second one is 82, Slide 7, actually, you highlighted this decline in electricity sold on the B2B segment. I was wondering how much this is related to the weakness of demand still due to COVID, how much is related to the Competitive environment in the commercial side that you mentioned before. And if you can share with us your view on the evolution Jon, of your electricity sold to this segment over the next quarter, I understand that you expect some recovery In the second half of the year, but if you can provide some additional comments. And the last one is related on the net debt guidance For the full year, if I remember well, you had €8,000,000,000 if this is confirmed.
Thank you.
Okay, Enrico. I will try to give you some color on this question, the first and the second question and Luca will complement this. Our guidance have confident we are, as I have said, absolutely confident and comfortable with this. It is true that power prices are increasing And our powers for position has been negatively Impacted in the Q1 of 2021 by the higher than expected, let's say, that power prices in Liberia, But having compensated by the positive result of our loan position in commodities, mainly CO2 and oil, in which we had a clear bullish view. And well, Looking at the full year, a dynamic strategy that we will apply will lead us To limit the impact of higher power prices, at the same time that we take advance of the anticipated CO2 purchases.
That is in my opinion and nothing that Luca could complement. And in relation with the what about the reduction in the B2B segment, It's mainly due to the COVID effects that has really hit this segment, Mainly industrial and SME Companies, let me say that during the whole year, That is during the lockdown and the pandemic situation. The drop Was something around 10% in the industry, 10% in the services and a Slightly higher B2C. Now Services And SME continues around 10% of drop compared with The same period of the last year and only the industry is recovering Little by little the situation. So in my opinion, the first thing here is, yes, the COVID effect.
Luca, could you complement?
Sure. No, when it comes to the first questions, I think you touched upon, I mean, basically, we still have obviously Some open position when it comes to electricity position. But as Pepe said, basically, this is counterbalanced by long position when it comes to Brent and CO2, obviously, for the production, we were expecting the islands and these two effects Basically mitigating themselves. So even though you could expect, let me say, higher pipe prices throughout the year, We have, let me say, an edge that is working perfectly in order not to suffer any negative effect. When it comes to the third question, The guidance was €8,200,000,000 when it comes to net debt for this year, and we confirm the guidance assuming regular working capital of about €600,000,000 So some improvement in the overall working capital along the year.
Thank you. The next question comes from Jose Ruiz from Barclays. Please Jose, go ahead.
Yes, good afternoon and thanks for taking my questions. Just to the first one is within the Integrated unit margin, are you including the €188,000,000 from the CO2 regularization? And if you can share what is from that €30, the retail margin? And the second question is basically If you can make a comment on the proposal of the new capacity market in Spain. And if there is any impact, I was wondering if you had included it in your business plan.
Thank you very much.
Okay. So maybe Pepe, I'll ask the first one, you go for the second one. Okay.
Let's go.
Okay. So when it comes to the CO2 basically clawback 488, yes, those are included in the Integrated margin, let me add that obviously, we have this positive effect, but we also have some negative effects In the Q1 of this year, the sum of all this effect are not accounted for a positive EUR 100,000,000. So it's positive €188,000,000 for the CO2, as we mentioned, that we have negative for ancillary services cost for the volatility we experienced in this Q1 Of EUR 25,000,000, we have negative mark to market in gas and electricity for about EUR 50,000,000, the majority in gas and some other non recurrent fixed costs. So let me say that we have a positive nonrecurrent of about EUR 100,000,000 in the Q1. And when it comes to the basically retail margin, we have, As mentioned during the presentation, slightly higher than €10 margin in supply And it's slightly better than Q1 last year.
And for the second question, I'll hand over to Peter.
Okay, Luca and Enrico. First of all, we have not considered this capacity payment in our business plan Because of all, up to the last, if I'm right, the 19th April, We didn't know anything. So but it is true that the Minister, Teresa Rivera announced that the Spanish government is launching a consultation on a drug regulation to create the capacity market In order, on the one hand, to secure the deployment of renewable in line with the Spanish National Energy Plan 2021 to 2,030 And on the other hand, to improve the security of supply, which is very, very important, let me say that If we are expecting forecasting to have more than 70% of the output in the year 2030 coming From renewables, you should really try to improve or to give some kind of The comfortability to the security supply. And the only way to do that is the capacity remuneration of field capacity. And I'd say not only new capacity, but also the existing one.
And looking for, in my opinion, efficient market signals needed to attract new investment on the one hand And to maintain a system plan, which are absolutely necessary to ensure that demand is met. So we are very happy with this new relation. We will see what happened. It will take, in my opinion, around 2 years just to deploy and to start with this because of all this The discussion that we will have with the we will have a mean of the companies with the minister And also the Minister and the Order of Spain with the European Union. That is some good news for us.
The second thing is that we don't have any euro or any payment in our business plan linked to
The next question comes from Javier Garrido from JPMorgan. Please go ahead.
Thanks. Good afternoon. I think there's only one question left. And if you could explain A little bit more in detail the evolution of the liberalized margin in electricity, Where you are reporting a EUR 26,000,000 increase, and this includes EUR 188,000,000 CO2 regularization, While the drop in sales in La Veradale sales and the drop in integrated margin of €4 per megawatt hour Would explain a €100,000,000 drop in the gross margin. So what is driving the delta?
You have a €188,000,000 Euro one off in CO2 and the EUR 100,000,000 drop in the gross margin from liberalized sales, And why is only the electricity gross margin growing by €26,000,000 And apologies for the complicated question. Thank you.
Javier, this is Luca. So just to give you the integrated margin Evolution, basically, we have a generation margin, which is down about €54,000,000 and this is driven by The negative impact of the government tax for about €30,000,000 we have €25,000,000 of lower OTC deferrances Visavis basically last year, flat margin in generation for ancillary services, which is a cost in retail And an output which is slightly higher for basically renewables For 0.3, but there's no relevant impact when it comes to generation. In supply, as I mentioned, it's more or less flat, But we have basically EUR 22,000,000 plus impact from a better sales mix, I. E. Lower sales for about 0.7 terawatt hour, But slightly higher margin, that is basically EUR 0.2,000,000 and that is driven by B2C sales.
But basically EUR 25,000,000 of cost in ancillary services. We are a long, basically, customer position. We have a long customer position. So we are a net payer when it comes to ancillary, especially when you have this volatility because we cannot recover basically this cost in generation. And obviously, the short position, which was positive for EUR 44,000,000 last year and is basically 0 this year.
So these are basically the effects that are driving basically down the path in electricity. Then when it comes to gas, Obviously, the mark to market is the one that is affecting this quarter, but you asked for oil basically.
The next set of questions come from Jorge Guimaraes from JV Capital.
Hi, good afternoon. Manny, thanks for taking my questions. I just have 2. The first is if you can clarify the negative market in gas, Where it is coming from? And the second one related to your very detailed Information about the strategic behavior in supply market in Spain.
From your words, I understand that none of the incumbents It started a price war, but the other you and the other 2 or 3 so far did not responded. What my question is, what do you believe will happen to the other incumbents, Which from your words not entering to this war so far? Do you expect them to remain still? Or do you see any risk of them entering into this struggle, this fight? Thank you very much.
Well, let me try to answer the second question and then Luca again will complement and also will answer the first one. In my opinion, there must be a rationality and economic sustainability Supporting any business, that is the first thing. When some agents only intends to Speculate in the short term instead of seeking to create value in the medium and long term, a bubble is created. That is what happened in the renewables and that is what happened in the supply in the supply. But just because this has no is not sustainable in the future, What I think and what I would like to think is that it is more a tactical situation that will finish Shortly.
Well, the thing is that you should Maintain yourself calm, doing things, of course, of course, doing things because what we are looking for is Just to create value for our customers and also for ourselves. As I have said, being incumbents, Which means for me big players that wants to stay in the business for long. So being incumbents or being new entrants, but trying to be for a long time in the market, in the business, You should take care about the market. That doesn't mean you are not going to compete, of course. You are going to compete.
You should compete in technology. You should compete Trying to reduce cost, you should compete that. Never you should try to go below your cost. Let me say, many suppliers, I would say, new entrants or some well, at least some of them, if you go to the P and L, It is amazing, negative. So what are they looking for if they have negative PMO?
They are looking for increase the customer base and sell the customer base, but that doesn't fit very well with an incumbent, I mean, a big company that wants to stay in the business for a long time. So that is why I have said, 1st of all, I don't think it's going to last a long time. 2nd, It's our strategy. On the one hand, continuing with our effort in digitalization, Looking for the platformization, looking for a unique value proposal to our customer, looking for creating value, Creating value. On the other hand, of course, trying to mitigate this, Let's say, I would like to say shorter situation shorter situation.
And that is What I have said, navigating in troubled waters. Well, Matt, I think that sooner or later, And I think sooner we will see how things go to what it should be. That means a very high competition, that is, but not a silly competition. That is my opinion. And Luca?
Yes. And when it comes to the first question, so on the mark to market of gas, I mean, obviously, these are the position that we have on gas, so non cash. The delta is €61,000,000 It's negative for €32,000,000 this quarter, and it was positive for about €29,000,000 in the Q1 2020. Now as I said, this is basically we don't have any cash effect, and we expect Basically, the impact will be diluted on fully in order to license along the next quarters as contracts have been settled. So it suggests, let me say, the current mark to market on the position as of today.
And I guess This is the first question. We don't have any other questions, Marla.
Thank you. The next question comes from Lilian Stark from Morgan Stanley.
Just one question for me. You had in the past mentioned that you were focusing more on the SME segment. Given the trouble they've had so far from what you mentioned that they're still seeing Declines in demand. I was just wondering if there is any concern on your behalf around counterparty risk That some of these businesses might just be under pressure for a bit longer given how they might have been affected by the COVID situation?
Pepe, you want me to answer this?
Yes. Okay.
So When it comes to, let me say, managing of bad debt and what we are seeing on bad debt evolution, Let me say that once we have seen still some tail of COVID in the 1st 2 months of this year, Already in March April, this has been recovering quite well, especially in all the B2B sector, including SMEs. Now where we see more, let me say, potential increase in terms of provisioning throughout the year is on B2C. B2C is the one that is most affected as of now. So it depends a lot on, let me say, the recovery, the GDP recovery of the country And the impact of this on basically Main Street in order for us basically not to basically increase provisioning, maybe But when it comes to SMEs in particular, we have seen already a rebound positive rebound in terms of Evolution of basically counterparty in the last 2 months, so the months of March and the months of April.
Okay. Alberto Magnolfi is back with some additional questions. Please, Alberto.
Mar, thank you. Just one actually and just because the magnitude is big, so apologies for following up using your comments. But Luca, you said €100,000,000 is the net positive effect in the quarter. Am I right in thinking that you're just talking about above EBITDA And then we also have the €80,000,000 financial expenses or is it €100,000,000 all in at the, Let's say, just the entire level at the bottom line. Thank you.
So the financial Expenses effect, that's it comes obviously with the rest of the sentence. But to be honest, we are not planning on the bottom line. So The non recurrence in the quarter are positive €100,000,000 and the majority of that, especially the CO2, was not obviously, Let me say, you have counted a budget for, but we had obviously a tougher situation in the Q1 we had to So that's why we are basically confirming guidance, expecting a normalization of the situation along the year and counting on this basically 100,000,000 positive that we recorded in the 1st part of the year.
Okay. Thank you. This was the last question from the call, And we have received a couple of questions from the web, okay? The first one comes from Eli Mamadou from Bloomberg. And I guess that is for you, Luca.
How do you expect your cost of debt to evolve in the coming years if the increase in bond yields and inflation continues?
So to date, we have 60% of gross debt, which is interest rate hedged. The average life This edge is similar to the one of the debt, as AURO, which is 4.5 years in terms of duration. So given the absolute level of rates in the eurozone And the significant percentage of restaged, we will not expect basically any material impact or we expect a very moderate impact. Now the current estimation for the full year is still 1.7% in terms of cost of debt. And obviously, if really interest rates Tends to go higher like you have seen in the U.
S. Recently, obviously, we can also basically start to fixing more Because we've been probably one of the utilities with the more variable stance in the past that obviously has allowed us to reach this Basically low cost of debt, but obviously, as soon as we see a change in the environment, we could actually More on maintaining or limiting any impact on the overall cost of debt.
Okay. And the last question comes from Gonzalo Sanchez from UBS And it's asking about our view of the potential auction for the excess capacity from the coal plants that will be shut down. If we have some advantages by presenting a trade transition project or we will go through the competitive process that the government is planning To
Lance? I will say something and then Luca, please compliment the answer. We will go through the competitive processes that we will see in the future. Having said that, Yes, in the so called gas transition, we have many projects linked to the special Coal power plant closure that will create Really, employment and will refer the place in which we have This coal power plants. So having said that, well, mainly we will do these Tenders, let's say that competitive processes and perhaps some of them we will have An extra premium, let's say that, yes, because we are trying to rebar the situation due to the closure of this call for Parash.
Yes. And if I may compliment Pepe, Basically, the regulations for basically governing the auction, for instance, these processes The auction should be for the plant of Teruel, which is the North in Andorra. And the work criteria would be obviously socioeconomic And obviously, we are working to obtain obviously the necessary capacity for the renewable developments we are planning in this area.
Okay. Many thanks. There are no more questions. And just to remind you that