Good morning, ladies and gentlemen, and welcome to the First Q 2022 Results Presentation, which, as always, will be hosted by our CEO, José Bogas, and the CFO, Luca Passa. Following the presentation, we will have the usual Q&A session open to those connected on the call and on the web. Thank you, and now let me hand over to José Bogas.
Thank you, Mar, and good morning, everybody. Let's start with the highlights of the period. The results we present today are clearly marked by the persistent instability in the macro context and increased gas volatility in markets worldwide. Coupled with the headwind of a war scenario in Ukraine, we have witnessed new all-time record pool prices across all European countries, which jointly, with growing inflation, have led the European Union to allow governments intervention in the energy markets. Our operating results, sorry, could not be immune to this context, leading to a 10% drop in EBITDA, while net ordinary income decreased by 31%. To overcome such challenges, we have accelerated our energy mix decarbonization by increasing our investment effort by more than 50% versus the previous year, mainly in renewables and distribution.
At the annual general meeting held last April 29th, a total dividend of EUR 1.437 per share was approved, entailing a 7% dividend yield for 2022, with a final dividend of EUR 0.937 per share to be paid on July 1st. Moving now to market context on Slide number four. During the first quarter, the demand in Spain came to a standstill in clear contrast with the recovery trend initiated last year. The war in Ukraine and the transportation sector strike in March added to the already visible sign of the economy's slowdown in January and February as a consequence of high energy prices. As a result, cumulated mainland power demand in the period decreased by 2.9% compared to the previous year.
Likewise, in Endesa's concession area, gross demand decreased by 1.7% or 1.1% when adjusted by calendar and temperature effects. We observe a sharp consumption decrease in the residential segment due to rising energy prices and mild temperatures, coupled with the mentioned industrial downturn, mainly affecting chemical and metallurgical sectors. To the contrary, the service sector recorded an 8.4% growth thanks to the relaxation of COVID restriction. When it comes to pool prices, market imbalances and tensions in worldwide gas market have driven average pool prices fivefold versus previous year, reaching on average EUR 229 per MWh with an all-time record high of EUR 545 per MWh the 8th of March, thus making this month the most expensive ever.
This conditioning factor can be extrapolated to most European countries which, with their generation mixes and procurement source distinctions, recorded similar electricity price levels. Moving to slide number 5, we can see a brief overview of the latest development on the regulatory front, with several measures to contain electricity bills. The publication of the second EU toolbox, REPowerEU, provides a set of guidelines to offset the impact of the energy crisis, stressing its temporary and exceptional nature. Among the main relevant issues, the European Union clearly supports the current CO2 market scheme as efficient, excluding energy sold in advance from the generation auctions and clawbacks, and opens the possibility of a windfall profit clawbacks, but only for actual profit and never on a retroactive basis.
The European Union clearly advocates reducing dependence on fossil fuels and to accelerate renewable development as a medium- and long-term solution. Most of these measures were already in force in Spain since 2021 and are mostly neutral for the sector. At the end of March, the Spanish government approved Royal Decree 6, which contains a set of temporary and extraordinary measures to contain electricity bills, such as reduction of charges and extension of tax cut, acceleration of the approval process of renewable project, advance settlements for recorded producers, increasing the Social Bonus discount rate, and expanding financing scheme to all electricity industrial players. Finally, concerning the gas levy, its extension to the end of June, setting an explicit cap of EUR 67 per MWh for the inframarginal generation. We expect that the measures will have a neutral or very limited impact on our accounts this year.
Lastly, it comes to the so-called Iberian gas cap. We still think that all measures could have been taken at the European level, limited in time and tackling the root of the problem. In the absence of knowing the details of the proposal yet to be approved, it is difficult to assess its consequence as well as to calculate its impact. Now, we turn to the evolution of the operating parameters on Slide six. Over the last 12 months, we have continued to make progress in shifting the generation mix, bringing some 700 MW into operation. Mainland renewable capacity is 9% higher than in the first quarter 2021, while CO2-free sources now constitute 69% of our installed capacity on the mainland.
Over the first three months of 2022, Endesa connected 56 MW of new wind plant to the grid and 142 MW of new PV, the San Serván project, which have, yes, finalized the testing process with the TSO and are at the final milestone to became operative in the second quarter. On the other hand, this first quarter has been one of the driest in recent years. In that context, the lower renewable output was offset by the higher thermal production, mainly CCGTs. Total mainland output reached in this quarter 12.5 terawatt-hours, slightly higher than the previous year, while emission-free production remained at 80% of the mainland total output. Moving to Slide number seven. As of March, the pipeline has surpassed 80 GW, supporting our growth ambitions to accelerate renewable deployment.
The matched pipeline now is worth around 8 GW, all of which have TSO-awarded connection points. 2022 renewables target are thus secure as we have around 90% either in operation or in execution. With respect to the 4 GW committed additions for 2022 to 2024, we stand at around 50% addressed with over 2 GW currently in execution or already built, with solar technology representing the majority of this project. Based on our policy of hybridizing storage with new renewable capacity, we aim at gradually incorporating batteries into newly installed renewable capacity once the regulation guarantees the competitiveness of these facilities. We are developing an innovative renewable model in Portugal, where we won two tenders.
The just transition tender in Pego with a pioneering project for the installation of solar, wind, battery, and electrolyzer capacity, and the floating PV auction where we were awarded with connection right for 42 MVA of a hybrid floating solar PV with a wind and battery facility in northern Portugal. Let's now take a closer look at customers on slide number eight. Total sales in the first quarter 2022 decreased versus the previous year by around 5% to 22.1 TWh, registering a 14% drop in regulated sales and a 3% decrease in liberalized sales. The 6% decrease in industrial sales is clearly marked by the economic slowdown. The sustained and very focused commercial strategy followed by Endesa and the introduction of more appealing offers have strengthened our position.
Almost 800,000 new customers were added to the free market during the last 12 months. Looking at Endesa X, electric mobility performed extremely well with a 36% increase in the number of installed charging points that now reach a total of 10,200. In this regard, let me comment on the recent spin-off of the electric mobility business, creating a new company called Endesa X Way, and the subsequent sale of a stake of 51% to Enel X Way. It will allow us to promote the capabilities being developed worldwide to provide value-added services in the field of electric mobility in the Spanish and Portuguese market. On slide number nine. Electricity sold in the Iberian free market decreased by 3%.
The unitary integrated margin remained around EUR 30 per MWh, almost flat compared to 2021, despite the complex and challenging market and price scenario, resulting from unitary revenue that rose to EUR 141 per MWh, associated to a higher pool price context and a slight increase of index seller sales. Increasing variable costs due to higher fuel and energy purchases at a higher unitary price. Integrated margin reached around EUR 550 million, almost flat versus the previous year. Analyzing its breakdown, let me anticipate that in January, a new intercompany contract came into force between the electricity generation business and supply, setting a new bilateral price of EUR 65 per MWh for all price-driven production.
The generation margin increased mainly due to this new price referent and a higher thermal output, partially offset by lower hydro and wind output. The supply margin was likewise affected by this, by the increase in sourcing costs and high ancillary and SAEP costs not passed on to our customers. No effect on net position. Regarding forward sales, 100% of our 2022 price-driven output and 82% for 2023 have already been hedged at the day-ahead price of 65 EUR per MWh set in the new bilateral contract between our generation and supply subsidiaries. In network, I am now on slide number 10, volumes of distributed energy remain almost flat during the period. The upward trend in service quality shows a steady improvement.
Our effort to improve quality and efficiency resulted into a drop in losses that improved 0.3 percentage point, while TIEPI improved by around 7%. Now, hand over to Luca, who will detail the financial results.
Thank you, Pepe, and good morning to everybody. On the financial highlights, I'm on slide number 12. EBITDA stood at EUR 914 million, decreasing by 10%, and net ordinary income was down by 31% year-on-year, reaching EUR 338 million, both of them affected by the absence of positive non-recurring items and extremely volatile scenario that have weighed on the performance. Funds from operation reached -EUR 476 million, affected by the temporary worsening of working capital. These sets of results reflect the extremely difficult market context I previously commented. Moving to the detailed analysis of the period on slide 13, we have invested almost 50% more than the previous year, mostly allocated to networks and renewables, with the remaining portion deployed on customers and conventional generation.
EBITDA reached EUR 914 million, -10% versus first quarter 2021. Generation and supply showed a deterioration of 11%, clearly affected by the non-recurrent item booked in first quarter 2021 from the 2006 CO2 sentence amounting to EUR 188 million. Distribution EBITDA declined by 9% to EUR 432 million. Going into more detail, customer business was impacted by the increase of commercial sourcing costs, mainly as a consequence of the bilateral contract with generation business not passed on to the final customer. Excluding the one-off mentioned before, EBITDA would have increased by 10% over the period. Moving now into a deeper analysis, we are on slide 14 on the generation and supply business.
Gross margin amounted to EUR 898 million, -4% versus last year, mainly impacted by the absence of the one-offs and an increase in generation and supply margin by EUR 151 million due to management of commodities for EUR 160 million, the slightly lower integrated margin for -EUR 21 million, as previously explained. No mainland generation margin was reduced by EUR 87 million, mainly explained by the negative fuel margin compensation impacted by the regulation which still does not recognize the actual fuel cost. In this context, we have been able to offset this negative thanks to a successful management of our gas sourcing activity.
In the gas business, we booked a positive delta of EUR 61 million versus the previous year as a consequence of the improvement in the wholesale activity, partially offset by lower retail margins. Finally, positive evolution of Endesa X. EBITDA reached EUR 482 million, -11% decrease versus last year, or +35% if you exclude the one-off, as previously commented. Fixed cost and others increased by EUR 25 million, mainly due to higher activity. Moving to distribution on slide 15, distribution margin dropped by 7%, mainly affected by the previous year settlement. EBITDA decreased by 9% to EUR 432 million, a similar amount as fixed cost and others remain almost flat over the period. Now moving on to P&L evolution from EBITDA to net ordinary income on slide 16.
Ordinary net income came in at EUR 338 million, down by 31% year-on-year, based on lower EBITDA by -10%, higher D&A by 5% due to the investment effort, lower financial charges as a result of the interest for the 2006 CO2 court sentence booked in the first quarter 2021, partially offset by the update of the workforce reduction plans provisions and other minor effects, and lower cost of debt from 1.7% last year to 1% in first quarter 2022, partially compensated by lower effective tax rate, now at 23.1%. Finally, higher minorities for better results of renewable companies, mainly wind with minorities. Net of non-recurring items booked in 2021, net ordinary income would have increased by 14%.
Moving to the cash flow on slide 17, funds from operation reached minus EUR 476 million, affected by working capital swings of EUR 1.3 billion, out of which about EUR 800 million are expected to be temporary and corresponds to EUR 0.6 billion associated with the sudden change of the energy market environment, which unbalanced the equilibrium between vendors' payments and clients' bill collection. EUR 0.2 billion mainly from higher regulatory working capital. We expect the above effects impacting working capital to normalize over the year, assuming stabilization and normalization of the energy context and no further regulatory measures. I will now move on the debt evolution, and I'm on slide number 18. Net debt amounted to EUR 10.3 billion, EUR 1.5 billion higher than in full year 2021.
The increase was mainly driven by EUR 500 million of temporary deterioration of FFO, as previously commented, EUR 500 million of cash-based CapEx, raising by 25% versus 2021, and another EUR 500 million of the interim dividend corresponding to the 2021 results. Regulatory working capital at the end of the first quarter 2022 was EUR 963 million, about EUR 168 million higher than in the full year 2021. Based on the assumption of no further regulatory intervention and a stabilization of the market scenario, we still expect the net debt to be at EUR 9.5 billion at year-end, once the negative temporary impact in FFO is moderated in the coming months. Our leverage measure, net debt to EBITDA ratio of 2.5 times. Average cost of debt decreased to 1%, which is the historical low, in basically financing cost for us.
It's, I think, historical in comparison with other utilities as well. Despite obviously the decrease in interest rates, we expect the cost of debt to basically remain below 1.5 by year-end. Endesa has further consolidated its lead position in sustainable finance. As a result, the amount of gross debt which are sustainable is in the region of 65%, well on track to reach the 2024 target. We enjoy a comfortable access to markets, having liquidity for about EUR 4.4 billion, which allows us to basically to mitigate debt repayment for the next 23 months, almost two years. Let me hand over now to Pepe for his final conclusion.
Thank you, Luca. To close this presentation on the slide number 19, I would like to share some final remarks on the main achievement of the quarter. The resiliency of our long-proven integrated business model, which has allowed us to cope with one of the most complex energy scenarios so far. Our customer strategy allowed us to attract new free market customer benefiting from energy and a wide range of valuable services at competitive prices. The strong commitment to our customer has gained even greater importance where our commercial strategy is evolving to more efficient and long-term energy solution offer aimed at mitigating rising energy costs for homes and businesses. More than 90% of our additional renewable capacity targeted for this year is already in execution or in operation, which make us feel fully confident to reach the milestone set in our last business plan. Sorry.
Finally, our solid track record of delivering in complex years make us confident to successfully navigate the risks and opportunities that may arise during the remainder of the year in order to achieve the EUR 4.1 billion EBITDA and the EUR 1.8 billion for net income guidance, committed. Ladies and gentlemen, this concludes our first quarter 2022 results presentation. Thank you very much for your attention, and we are ready to take some questions.
Okay, many things, Pepe. Thank you, Luca. We can start now with the Q&A session.
Of course, if you'd like to ask your question via the telephone lines, you can do so by pressing star followed by one on your telephone keypads now. If you'd like to withdraw your question, please press star followed by two. We do ask that you please connect via a landline to ensure the audio quality is as clear as possible. I'll now hand over to Mar Martínez for the Q&A session.
Okay. The first question comes from Alberto Gandolfi from Goldman Sachs. Please, Alberto, go ahead.
Mar, thank you so much, and good morning. Thank you for taking my questions. Three, but hopefully quite quick. The first one is a question regarding your liberalized activities. Is there any way you can explain a bit more in depth how you made money in energy management or trading? Because I understand perfectly that you created an intra-company contract from generation to supply, and I understand the supply portfolio lost money because of that. But can you tell me any offset, you know, the energy management and trading? And do you plan to reprice the retail portfolio throughout the coming 12 months? Should we see an acceleration of, you know, retail margins here, but maybe normalization in energy management and trading?
The second question is, I think you've been very clear with the working capital movement, you know, similar to the call we had for your parent company. One thing that I'd like to ask you here a bit more in-depth, given there's quite a lot of debate or maybe lack of trust on the debt evolution, is there any way you can break down a little bit more the working capital movement between what may be a margin call, what may be a mismatch between procurement and sales, or what has to do with regulatory measure, you know, a tariff freeze for a certain segment, if at all. So just to give us the building blocks and give us confidence that really is going to reabsorb and stay low in from Q4 onwards. The last question is about regulation.
You know, thank you for commenting on the price cap on gas. You know, the average of EUR 50, you know, it's quite clear that obviously the forward curve seems already to have adjusted for it. You know, we are now at about EUR 140, EUR 150 for one year forward. My question, I guess, is EUR 140, EUR 150 is still relatively high compared to history for, you know, hydro, nuclear, merchant renewables. Do you also expect the gas clawback to be extended beyond June? And if so, I mean, I'm trying to figure out here the logic, right? You know, why would you do a clawback then put a price cap on gas and then fully pay as a pass-through the gas to a CCGT?
I mean, it's quite complicated way to basically put a price cap on fixed cost and just remunerate CCGTs. Unless there's an issue between spot versus forward pricing mechanism that I'm not understanding? Thank you so much.
Okay, Alberto, I will try just to give you some color to the third question, the one in relation with the regulation, and then Luca will answer the two first question. Okay. The first thing that I would like to say is that this cap, EUR 50 in average, of gas for the offer that realize the combined cycles is something that we have been discussing with the government because we think that what it is needed is just to take some kind of solution that really finish with the problem that we have. Let me say that this kind of solution could mitigate the impact to our customers, which is very, very important, and we agree.
This measure, let me say, over-reliance on the fuel, in that case, on gas, and it is not going just to cancel or to reduce the real problem, the root cause of the problem of the crisis that we have today. Having said that, you are right, we are going to have prices, electricity wholesale prices, something around 140-150, higher than the 67 EUR per MWh that we have in the so-called gas clawback. What is going to happen in the future? Well, what I think it would be natural, let me say that, just to try to incorporate one and the other or try to simplify the regulation that we have today.
Nevertheless, it could be possible that just to have the gas cap and then to have the gas clawback in the sense that the inframarginal generation continues being selling at this 65, in our case of 67 euros per megawatt hour. We will see what happen in the future, because as I have said, we think that this measure, the so-called Iberian exception, is not going just to resolve the problem. Is going to mitigate the problem. Now, we will see what happen with the evolution of the problem.
We really realizing the REPowerEU measures that try just to reduce the dependence on the Russian gas to accelerate the deployment of renewable to increase the savings the efficiency in electricity and all these kind of thing. These are going to be the measures that will resolve the problem that we are living now. This price cap something just to reduce or mitigate the impact on our customers. Having said that, with some strange things, let me say that in the sense that we are going just to distort the price signal, and also we are going to over-rely in the fuel and in the gas component.
Okay. Thank you, Pepe. On the first question on liberalized activities, just to give you some more detail, Alberto. Basically, the generation margin has increased by about EUR 190 million, mainly due to higher price reference in the region of more than EUR 140 million, which is driven by the bilateral contract that we have commented before at 65 between generation and supply, and also higher thermal margin for about EUR 20 million. That obviously all of this positive effect have to offset the negative lower hydro output and wind output that we had for the quarter, which accounted for about EUR 55 million.
Now, supply margin, which on the opposite was negative for about EUR 200 million, was affected by obviously this higher sourcing cost for the bilateral contract sixty-five for about EUR 150 million, and higher ancillary and SAEP cost for about 60 million, which obviously was not passed on to the final customer. These are the effects for the quarter. Now, when it comes to supply for the remaining of the year, we are basically plotting supply margins between now and the end of the year in the region of 6 EUR/MWh, which means that we will have supply margins in the region of 9 EUR/MWh for, you know, the rest of the year.
That is based obviously on the better sourcing cost, normalization of ancillary services, obviously lower OTC references for the supply business as well as some, let me say, renewal of all contracts that obviously have very low reference. Some repricing is expected towards the rest of the year, taking into account what is the regulatory environment at the moment in Spain. For the second questions, when it comes to the evolution of working capital, let me say that first of all, the first quarter always is a quarter with negative working capital. Last year was in the region of EUR 400 million. If you take out the temporary effect, this year would be in the region of EUR 500 million.
Now, the EUR 800 million that we refer as temporary within the EUR 600 associated to basically the mismatch between or the imbalance between vendors payment and the clients collection, I can refer to about EUR 200 million to basically the balance between receivable and payable accounts. You know that we pay the energy on a weekly basis, then we need to invoice the final customers and recover the money from the final customers, and that takes weeks. You know, about four hundred million for the commodity management that we mentioned, that obviously had a positive effect on margins in generation and supply. About EUR 200 million of higher regulatory working capital, of which basically the majority is in the islands. You have a little bit when it comes to renewables as well as for regulated gas.
These are the effects. Now, the expectation on the debt at year-end in EUR 9.5 billion, which is the confirmation of what we said in February when we presented the full year results, is based on regulatory working capital of EUR 1.1 billion and FFO north of EUR 3 billion, which is basically our budget for this year. We expect to recover all this temporary effect throughout the year.
Okay. Thank you, Alberto. The next question comes from Harry Wyburd from Bank of America. Harry, please go ahead.
Hi. Morning, everyone. Just two questions from me, please. Firstly, I'm just interested, why did you set this bilateral contract at EUR 65, which obviously is just below the cap of EUR 67, and how long do you expect it to persist 65 for? Is there any restriction in the price cap on what retail margin you can earn on top of the 65? Just trying to understand the interaction between the price cap and that level of 65. The second one's on your Cheniere US gas procurement contract. I think that's a quite big 3 BCM procurement contract. In theory, that's now massively in the money. I just wanted to understand, are you hedged on that contract?
Because I know that some of your peers are, which means they can't benefit from it in the short term. I'm interested to know if you swapped it into TTF for a period of time. Has there already been any impact on your results from that? Is that one of the things that's been driving your gas margin movements this year? Thank you.
Okay, Harry, let me say something about the first question, and then I will pass this first question and the second question to Luca. Why 65 below the 67? Yes, because, well, we decided just to establish this price before this 67, and based on our reasonable cost for our infra-marginal output. It is possible or would be possible just to increase in the future this price. So, there is no any problem for us. On top of this price, you should take into account the ancillary services and also the SAEP costs. So, we feel comfortable with this price that really cover our full cost. How long we will maintain this price? Well, at least we have decided just to have this price during the
Over the year, 2022. We will see if we continue, or we increase, or we reduce. It would depend on the evolution of the wholesale pool prices in the next year. In my opinion, we will maintain or we will increase a little this price just to get to the 67. Luca.
Yes. With regards to the second question, the Cheniere gas procurement, we are hedged for this year. You know, in terms of, you know, the hedging on gas procurement, we do it on a 12-18 months basis, and that's it. I mean, very different from other peers that have hedged for a longer period of time. Now, in terms of our hedging on gas, it's about 80+% for this year and 33% for next year when it comes to the retail business.
Okay. We move to the third analyst, that is Manuel Palomo from Exane BNP.
Hello. Good morning, everyone, and thanks for taking my questions. I've got a couple, first of all, on guidance and then, maybe another one on the charging stations. On the guidance, what I see is that, Q1 2022 has been maybe a bit weaker than we could have expected, and I wonder whether you could help us to build the bridge to achieve the full year 2022 guidance. I mean, what are going to be the moving parts that you expect to improve in the coming quarters, and whether you could well quantify them a bit, and also if you are assuming any material one-off. That is the first one.
On the charging points, I've seen that you have significantly increased year-on-year the amount of charging points from 7.5 to 10.2. I wonder whether you could give us a reference about what is your, I mean, expectation on anything, on returns, on EBITDA per charging station or anything that could help us to have a better view on how this business is evolving. Finally, I'd also like to ask you about the minorities. I mean, I've seen that there's a very significant increase in the minorities compared to the first quarter last year. You've mentioned that it's due to the, well, good performance of the renewables.
However, on the other side, we've listened to you saying that the hydro and, of course, the wind performance have not been that good. I wonder whether you could, well, clarify or shed a bit more light on why that significant increase in the minorities figure? Thank you very much.
Okay. Manuel, Luca will answer. Let me say, we are absolutely confident that we will reach the guidance at the end of the year. You should take into account another thing. If we don't take in consideration the one-off that we had the previous year, I mean, the EUR 188 million of the CO2 coming from the year 2006, we would have surpassed the EBITDA and the net income compared to the past year. We feel confident. We think that it's gonna be some kind of things like the hydro that we will manage over this year.
On the other hand, there are a lot of things, also one-off, that we will be sure that will help us just to reach or surpass the guideline that we have today. With regard to the recharging stations, while this is a business that it is starting, let's say that. While the figure that we have reached, public and private, recharging stations, 10,200, it's quite a figure. What we believe is that during the next years, we will see an acceleration in the e-mobility.
That is why we are expecting that we need to invest during the first year, but we will reach a good result, good viability of this business. Luca, if you want just to add.
Sure. When it comes to basically the guidance, let me say that we expect basically distribution to be on budget and recover, you know, this negative impact that we have basically experienced in the first quarter for EUR 32 million. When it comes to the integrated margin for the full year, we basically expect to be aligned with, you know, the absolute value in terms of guidance, which is EUR 2.5 billion, but with a slightly higher unitary margin in the region of 34.5 versus basically just shy of 34 that we had in budget, because obviously we expect lower sales in terms of volumes in the region of 72 terawatt-hours.
Now, the impact of the bilateral contract between generation and supply will be a positive of about EUR 300 million in generation and a negative for the same amount in the supply business. In the supply margins, taking aside this negative, we expect basically to have an overall negative of ancillary services and shape cost for about EUR 80 million. When it comes to the generation margin, basically we expect to have a negative impact in the region of EUR 90 million for a lower hydro output that we estimate at the moment in the region of, you know, 1.3, 1.4 terawatt-hours towards the full year, I mean, versus a median year in terms of hydro output.
That is basically supported or mitigated by better thermal results in the region of EUR 35 million-EUR 40 million. Basically, the contribution of the short position in the region of EUR 50 million between now and year-end, it basically contributed zero up until now. Obviously we have you know positives coming from the suspension of 7% generation tax that has basically been suspended up until June this year, as well as less hydro canon taxes given the new regulation of hydro canon, and you know some of the regulatory renewables that will come off the regulatory basically period because the investments are repaid. These are basically the effects.
As I commented before, when it comes to the supply margin, we expect a supply margin in the region of EUR 6/MWh for the full year, which is a remainder for the next nine months of EUR 9/MWh. Obviously, this guidance doesn't assumes any contribution from positive one-off that might come, you know, throughout the year. When it comes to the second question, let me just add two points that we do not expect EBITDA contribution within the plan. The EBITDA contribution of the mobility business will come beyond the plan in terms of, you know, positive contribution. For the minorities number, basically, we have a delta of in the region of EUR 22 million between the two periods.
A contribution of EUR 20 million from nine wind companies that are with minorities in the renewable business, which obviously has benefited from higher pool price vis-a-vis last year, i.e. their contribution has been higher. Some of them were also regulated. A couple of them were also regulated, came off from the regulatory scheme because investments was repaid. That is the effect that you see on minorities for the first quarter of this year.
Okay. Thank you, Manuel. We have now Javier Suarez from Mediobanca.
Thank you, Mar, and thank you for taking my questions as well. Two remaining. The first one is on the possible introduction of a price cap for gas or for the thermal technologies much more than for gas at EUR 50 per MWh. The question is, would you agree with the argument that the impact on your P&L should be limited since most of your infra-marginal capacity has been sold forward, but that should be a negative working capital impact related to the fact that the pass-through is not going to be automatic?
If that is the case, don't you think that we are entering into a phase in which there is this structural worsening in the working capital that needs to be accounted for in companies' strategies? The question that I wanted to ask is: do you think that this additional necessity to absorb working capital is something that may impact your capacity to continue deploying capital or maybe paying dividends? Thank you.
Okay, Javier, let me say first of all, that as we have said, we estimate a limited impact in our P&L, just because this 50 EUR per MWh of gas, this cap, it's not going just to affect our infra-marginal generation that we are selling at 65 EUR per MWh. This cap will reduce the wholesale price that we have today, something around 200, just to 140 or 150, let's say that. It is not going just to impact us. On the other hand, I think that it will help us just to reduce the working capital, but Luca, could you?
Sure. On the working capital, basically, Javier, this is our temporary evolution. I mean, I think we never seen the spikes that we seen at the beginning of, you know, the end of last year and the beginning of this year in terms of wholesale prices, so it's common to have this imbalance, when it comes to working capital. It doesn't mean that this might affect our investment decision as well as, let's say, our dividend policy. To the contrary, I mean, again, these are temporary measures, you know that, you know, the European Commission, Spanish and Portuguese governments are working on measures in order to reduce the impact on power price, which is the one that is actually affecting our working capital.
Obviously, what you know, I said clearly is that the assumption when it comes to our FFO evolution, net debt evolution for the remainder of the year is based on the fact that we don't have other intervention that might affect basically working capital from a regulatory standpoint. That is something that at the moment we don't have visibility on. Let me say that you know, all the intervention in the past actually has affected you know, in some way our working capital evolution, our and the sector working capital evolution because in the end, the first test to basically finance the measures that the government are taking are actually the companies which are within the sector.
Okay. Following questions come from Fernando Garcia from RBC Capital Markets.
Good morning, and many thanks for taking my questions. In gas following on Harry's previous question, can you clarify if the 3.5 EUR per MWh unit margin is all cash or what part of that is cash? And as well in gas, moving to retail, can you comment about your strategy in retail given the cap in the last resort tariffs? What is the impact if they decide that the last resort gas cap is extended beyond June 2022? Thank you.
Okay, Fernando. Well, I think the details will explained by Luca. Let me say that, with regard to our strategy in retail, in gas, well, we continue. First of all, we have decided that you know very well just to go out of this business of gas in the year 2040. That is ten years in advance to the 2050. We think that we need to reduce the reliance in this gas for many things. One very important issue that we are living now is the situation, the geopolitical situation with Ukraine and Russia, and we need just to reduce the dependence on the Russian gas.
Going forward, we need to reduce the use of gas in the future, gradually, but just to reduce. Having said that, our strategy, well, in the short term is just to continue, but not trying to increase our position in gas, trying to maintain or reduce, as I have said, gradually this position. In any case, Luca.
Sure. When it comes, I guess you're referring to the slide in the annex, slide 25. The 3.5, in terms of, unitary margin, for gas is total gas, so it's wholesale plus retail. The evolution of, gas gross margin has been, an increase of EUR 61 million, basically in the first quarter to, EUR 72 million in total. Basically, these are driven by significant improvement in the wholesale activity. We're talking about EUR 146 million more, which includes EUR 70 million of, positive, basically mark-to-market, when it comes to gas hedges. Which allowed basically to compensate the negative margin obtained in the retail activity, which is basically in the region of, EUR 85 million.
This negative in basically gas retail has been the results of seasonality and higher sales above basically contracted volumes that we had to basically recover into the market. The 3.5 is for the overall gas business. To your last questions, if basically Royal Decree 6 the gas clawback would have been extended you know towards the end of the year, to be honest it depends on the terms on which is extended but at the moment we do not foresee any impact to our business even if it's extended.
Okay, thank you. We have now Javier Garrido from JP Morgan. Please, Javier, go ahead.
Good morning, everyone. I have a couple of questions left. The first one is just to see if I understand with my simple mind the message you have given, because if I remember correctly, at the end of last year with the full year results, you said you have hedged your fixed cost generation at EUR 54 per megawatt hour for 2022, and you were expecting supply margins in line with last year's EUR 10 per megawatt hour. Now you have this intra-company contract for infra-marginal production at EUR 65 per megawatt hour, and you're expecting EUR 6 per megawatt hour of supply. Are those numbers correct? Because if correct, they would indicate a very significant increase in the profitability for your fixed cost generation capacity. The second question is on the price cap.
Well, first thing, thank you very much for being so open to discuss it even before it's approved. That's incredibly helpful. I would like to understand what could be the mechanics for passing through to clients the compensation that will be due to thermal generators because Are you expecting it or is your conversations with the government suggesting that is it going to be a fixed fee in the tariffs, or will each supplier need to pass through to each client once the contract comes up for renewal? How will the mechanics work? Thank you.
Okay, Javier. Let me try to give some answers, and then Luca will go more in detail. Well, you are right. You remember well that when we said that almost 100% of our output in the year 2022 was hedged at 54 EUR per MWh, that is clear, and it's what we did. Just because of the regulation, we decided on looking for a reasonable price in the future. What we thought is that the reasonable price should be or would be the 65. That's why we decided just to change this bilateral contract between our supply company and the generation company.
That is, yes, to move, if you want, result from one company to the other, but not changing the total, results. What it is clear is that we have reached this first quarter the integrated margin, the whole integrated margin, really at around 30 EUR per megawatt hour. That is very similar to the ones that we got in the past year. We feel comfortable, we feel confident, and then Luca will explain a little bit more deeper. Just in the price cap, how we are going to pass, let's say that this, the cost of the compensation to the final customer. What I really don't know.
We need just to see the details of that. There are some ideas about that. Just because you should take into account that if you pass to all the customer, what you are going to do is just to reduce the one index to the pool price, but you are going just to increase the price of the ones that had decided just to hedge their position or to sign a fixed price contract. We will see how it's going to be resolved, this point, but we need just to know the details.
On the liberalized margin expectation for the full year, basically I repeat what I said. We expect 72 TWh in total of volumes of sales, which basically means another 54 between now and year-end. We expect an integrated margin of 34.5 based on this amount of sales, which means that we will have an integrated margin for the next nine months in the region of 36 EUR/MWh. This imply for the full year a supply margin just above 6 EUR/MWh, which means for the next nine months, a supply margin in the region of 9 EUR/MWh.
Now the bilateral contract that, you know, Pep was referring before, basically transferring some margins between the generation business and the supply business, obviously positive on generation and negative on supply. Those are the difference, but in terms of, you know, the evolution of the business, is the one that we also commented at the end of the year, just with different numbers for this bilateral contract.
Okay. Thank you, Javier. We move to the following questions. Comes from Jorge Guimarães from JB Capital.
Hi, good morning. Most of my questions have been answered, but I have one regarding the non-mainland business. I believe I understand that the gross margin for Q1 was EUR 41 million. So I would appreciate if you can confirm this. This is in the last pages of the presentation. What would be the full year 2022 EBITDA range for the non-mainland area? I know that you are not separating any more from a formal point of view, but any help on that would be helpful. Thank you very much.
Okay. Jorge, when it comes to non-mainland, the island, yes, it's correct. The margin for the full quarter, a positive EUR 41 million, with a negative effect of about EUR 82 million, for the basically, cost recognition when it comes, you know, to generation. Expectation for the full year, unless there is, basically a change in the regulatory scheme, up until now is just EUR 100 million of contribution to EBITDA, with this negative effect on basically, the recognition of the cost for the generation, which will be relevant. But obviously, as mentioned before, we are continue to basically mitigate, you know, through hedging on our sourcing gas activity.
Next question comes from Antonella Bianchessi from Citi.
Yes. Thank you very much. Just a quick recap on your forward sales for 2023. How much is the price that you sold to final customer, so excluding the intracompany movement? If you can repeat the volume that you have secured for 2023. My other question is really on the distribution. We have seen OpEx going up, so I wonder, you know, if you can elaborate what we expect on a full year, if there are any intervention in order to, you know, reduce the OpEx. Then, on the return on CapEx, because obviously the distribution as is takes a return of 5.58% pre-tax with the Spanish rates at 2.2% today. I wonder which is your view on the value creation of the CapEx in this area.
Finally, if you can kindly repeat the guidance for net debt on a full year basis.
Okay, Antonella, with regard to the first question, the forwards price of the year 2023. Well, this price now is higher than the one that we have in our bilateral contract between our supply company and our generation company. We will see how evolved the prices in the year 2023. In principle, what we will do is just to continue with our policy and our bilateral contract. Just more or less to cap our price at EUR 65, which is a good price that really cover all the full cost of our infra-marginal technologies.
Going back to the integrated, basically, numbers for the liberalized business for the full year, I repeat, Antonella, we are expecting 72 terawatt-hours of sales, with integrated margin of 34.5, and a supply margin of 6.2. As Pepe pointed out, 82% of the generation, basically from margin generation is already hedged at 65 EUR/MWh. When it come to the net debt figure expectation for the end of the year, we are expecting EUR 9.5 billion of net debt, confirming what we said in February when we announced full year results, and that is based on regular working capital of EUR 1.1 billion and FFO generation above EUR 3 billion for the full year.
On distribution return on our investment, obviously this is a regulated business where you don't have a pass-through of inflation. Clearly, the resets will be done in the forthcoming, you know, couple of years. Inflation will have an effect on interest rates, and we expect that we have, let me say, a benefit on the evolution of the resets for the next regulatory period. At the moment, we don't have an inflation pass-through on the formula, and there are no discussion at the moment to include an inflation pass-through on the formula.
When it comes to OpEx evolution, the guidance for the full year remains at EUR 1.8 billion in terms of, you know, OpEx. Yes, you have some seasonality in the first quarter of higher OpEx in the region of, you know, less than EUR 50 million, where you have activities which are obviously basically spending more at the beginning of the year. You know, that includes obviously renewable, includes a little bit the services business. Also includes some of the O&M that we had to basically perform on some of the thermal plants for the first part of the year. The expectation that we are sort of and confirm guidance for OpEx at 1.8 for the full year.
I guess, I've taken all the questions. Yes.
I think so. Thank you, Antonella. We have now Gonzalo Sanchez-Bordona from UBS.
Hi. Thank you, ma'am, and good morning, everyone. I have a couple of follow-ups on the regulation. Clearly, with the gas cap, we might get a better price for consumers, but they still are much higher than historically as you have said before. My question is, where are we at the moment on the proposed auctions or forced auctions for the large suppliers? And also on a potential reform of how the PVPC is calculated, because I think there was some consultations on that, but we haven't heard much on it for a few months.
If you think there are any other things that might be done in the next few months in order to address the issue, any comments on that'd very grateful. Also just another question on the selling strategy that you have. I mean, we've seen a significant change of customers from the regulated to the liberalized side, and clearly this is putting you ahead of the plan. My question is, what is your expectation on that front, and whether do you think that could change a little bit your outlook, either positive or negative? Negatively, I would assume positively, but any thoughts welcome. Thank you very much.
Okay, Gonzalo. Thank you. First of all, with regard to the generation auctions, well, I would say that the European Commission has stated that this auction cannot affect the energy already sold. As we have said, we have sold all our inframarginal output generation for the year 2022, and almost all if we take into account the inertial. Because we have hedged more than 80%, and taking into account the inertial, we would hedge 100% also for the year 2023. That means if auction cannot affect the energy already sold, we will not be affected by this. That is what I can say. If we are expecting other things in the next few months, we hope no. No.
Who knows? The real thing that we need is just to reduce the regulation because we have overlapping regulation now with the gas clawback, with the cap on gas, with the auction, with the CO2, with the whatever. It will be helpful for all of us just to clarify and to simplify this regulation. What we would like to see in the future is a reduction of this regulation, and we are not expecting more things just to regulate.
Yeah. When it comes to, Gonzalo, the evolution of supply customer business, obviously yet we had a very good inflow in terms of liberalized customers, and obviously an outflow on the regulated part of the business in supply. How this might evolve throughout the year, a lot will depend on this new regulation because obviously, if implemented, the price cap on gas will benefit mainly, or from what we understand, specifically the regulated customers in supply. Therefore, let me say the outflow that we've seen in the recent quarters from regulated might basically mitigate, and obviously that will mitigate our inflows on liberalized business. But again, as for now, I mean, this obviously is a very let me say steady business.
Transition will be sensible and will take time. Therefore, we still have, you know, few good quarters of customer inflows and liberalized business when it comes to supply. On your second question, the regulated tariff basically change or discussions, I think it's still there. You know, obviously as a sector, we made our comments to the proposal, but it's clear that the government is intervening for those customer with this proposal that supposedly should be approved very soon when it comes to the cap on gas for combined cycles.
Okay. Many thanks. This was the last question of our conference call. Just to say thank you for participating and remind you that the investor relations team is always available in case you have any other further question. Thank you, and have a nice day.