Good evening, ladies and gentlemen, and welcome to the first half 2022 results presentation, which will be hosted, as always, 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 evening, everybody. Let's start with the highlight of the period. Today's results are still marked by the persistent instability in the macro context and gas price volatility caused by geopolitical tensions worldwide. Additionally, inflation pressures have intensified while electricity prices are reaching new record highs in European Union countries and are expected to remain high in 2022.
In this context, the European Union has elaborated a common framework with a series of acceptable intervention measures that member states can consider to curb energy costs and to mitigate the impact on most vulnerable customers. The European Commission has clearly advocated to accelerate investment, both in renewable energy and grid and interconnection reinforcements, as a crucial factor to mitigate the risks of future energy crisis.
Our business development strategy is fully aligned, and the investment made during the period are aimed at these two fundamental energy transition topics. Against this backdrop, our like-for-like EBITDA increased by 4%, excluding the sale of Endesa X Way to Enel, which generated a positive impact of EUR 238 million.
Net Ordinary Income, in the same terms, decreased by 12%. On the next slide, we will look more deeply into the dynamics of the market context. First half figures show a certain leveling off in demand. As a result, cumulative mainland power demand in the period decreased by 1.8% compared to the previous year. The war in Ukraine, added to the growing risks of stagflation, is affecting economic activity, mainly industrial customers.
Gross demand in Endesa's mainland distribution area decreased by 0.1% or 0.5% when adjusted by calendar and temperature effects. On the residential segment, the consumptions fell by 4.6% in cumulative terms versus last year, mainly explained by lower remote working and cost-saving measures in a context of record energy prices. Likewise, the industrial segment, despite a slight recovery, is still affected by the economy slowdown, mainly in the metallurgical and paper sector, and records a 3.5% drop. On the other hand, the service sector demand grew by more than 11%, benefiting from a more relaxed post-COVID restriction and the summer season.
When it comes to pool prices, persistent market imbalance and uncertainties over gas stock for the next winter have multiplied pool prices by 3.5x , reaching an average of EUR 206 per MWh . These conditioning factors can be extrapolated to most European countries, which, with the generation mixes and procurement source distinction, recorded similar electricity price level. In July, the Russian gas supply flow reduction has resulted in European price rising again, while in Spain, the gas cap, in force since June 15th, has contained pool prices at around 50% lower. On slide number five, we can see a quick summary of the latest regulatory development aimed at containing electricity prices and mitigate its social impact.
The last set of measures, announced in May by the European Commission, is fully aligned to several toolboxes of available measures unveiled since the start of the Ukrainian crisis and mark an important step forward for the sector, mainly for renewables and network, entailing a significant increase in the investment pace for the rest of the decade.
Concerning the regulatory development in Spain, the approval of Royal Decree-Law 10/2022 established a gas cost adjustment mechanism, which is internalized by the CCGTs in their pool bids, and as we have already mentioned, it has brought a noticeable moderation of Spanish electricity prices in July. Additionally, it includes a mandate to introduce a price reference for regulated tariff based on a basket of products, including both daily and intraday and forward market price references to be applied in 2023.
In addition, Royal Decree-Law 11/2022 extended some of the energy measures already developed in the Royal Decree-Law 6/2022, including the gas clawback, which will be in force until year's end and where the electricity cap reference is maintained at EUR 67 per MWh for hydro, nuclear, and renewable output. A new proposed order to conduct regulated auctions for the fuel supply in the non-mainland territories was disclosed. We have submitted a series of allegations, as we believe that this ministerial order must ensure that the outcome of these auctions truly reflects a full cost pass-through in the current commodity prices scenario. Lastly, Spanish prime minister announced the establishment of a new tax to claw back extraordinary profits from all energy companies.
While the details are still unknown, it should be stressed that we have sold all our hydro, nuclear, and renewable energy below the EUR 67 per MWh threshold that the government has considered reasonable, and therefore, our results do not show any windfall or extraordinary profit. Now we turn to the evolution of the generation operating parameters on slide six.
Over the last 12 months, we have continued to make progress in shifting the generation mix, bringing more than 700 MW of renewables into operation. Mainland renewable capacity is 9% higher than in the first half 2021, while CO₂-free sources now constitute 70% of installed capacity on the mainland. Over the first six months of 2022, Endesa connected 122 MW of new wind and solar capacity to the grid.
Total mainland output reached 25.2 TWh, that is 11% higher than previous year. First half maintains lower hydro production seen in the first quarter, one of the driest quarters in recent years. In that context, the increase in wind and solar production, due to the entry of new capacity, together with the recovery of thermal production, mainly CCGTs and nuclear, more than offset the drop of hydro production.
Thanks to the continued effort of decarbonization, emission-free production is up by 6 percentage points versus 2021, reaching 78% and positioning us well on track to reach our decarbonization target. Moving to slide number seven. As of June, the renewable pipeline reached 77 GW, supporting our growth ambitions to accelerate renewable deployment. The mature pipeline now is worth around 10 GW, out of which 9 GW have TSO-awarded connection points.
2022 renewable target are thus secure, as we have around 90% either in execution or in operation, while in 2023, this figure amounts to around 70%. With respect to the 4 GW committed additions for 2022 to 2024, we stand at around 50% addressed with 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 to gradually incorporate batteries into newly installed renewable capacity once the regulation guarantees the competitiveness of these facilities. Let's now take a closer look at our customer base on slide eight. Free power sales increased by 1% versus the previous year, while regulated sales dropped by 20%. Total sales decreased by around 2% to 42.99 TWh.
The decrease in B2B sales is clearly marked by the economic slowdown, mainly due to the Celsa contract termination and the cease of production at Alcoa. Our very focused commercial strategy and the introduction of attractive offer in the current price context have resulted in a remarkable increase during the last 12 month in our free market customer base by adding over 1,000,000 new customer, of which 700,000 were in the last six month.
Looking at Endesa X, e-Home contract performed extremely well with a 25% increase. Charging points increased by 39%, up to 11.1 thousand devices, and EVAS charging points reached 120 unit, tripling last year's figure. On slide number nine, electricity sold on the Iberian free market increased by 2%.
The unitary free power margin reached EUR 32 per MWh, 28% above previous year, despite the complex and challenging market and prices scenario, resulting from unitary revenue that rose to 141, associated to an increase of index sales and higher pool price context, and increasing variable costs due to higher energy purchase costs and higher fuel costs. Free power margin reached EUR 1,178 million, well above previous year.
Analyzing its breakdown, the generation margin margin increased mainly due to the new price reference and higher thermal output, partially offset by lower renewable contribution and other minor effects. The supply margin was likewise affected by the net increase in sourcing costs and higher ancillary and shape costs not fully passed on to our customers. Positive effect on short position.
Regarding forward sales, 100% of our 2022 price-driven output and 88% for 2023 have already been hedged at the base load price of EUR 65 per MWh set in the bilateral contract between our generation and supply subsidiaries. Moving to operative achievement on network. I am now on slide 10. Distributed energy stood at 66 TWh, up by 3%. Our efforts to improve quality and efficiency resulted in a drop in losses that improved 0.1 percentage points, while time of interruption improved by around 8%. I now hand over to Luca, who will detail the financial results.
Thank you, Pepe, and good evening to everybody. On the financial highlights, I'm on slide number 12. EBITDA like-for-like increased by 4%, excluding the sale of Endesa X Way to Enel, which has generated a positive impact of EUR 238 million. Net Ordinary Income was down by 12% year-on-year, reaching EUR 734 million, excluding the net effect of the Endesa X Way transaction. Reported funds from operation figure, which amounted to -EUR 169 million, was strongly affected by the increase in the regulatory working capital during the period by EUR 733 million. Once stripped out from this impact, both years, FFO would have reached EUR 564 million, 32% more than adjusted FFO in the first half of 2021.
Moving to the detailed analysis of the period on slide thirteen, we invested EUR 934 million in the period, almost 26% more than in the previous year, mostly allocated to the two main strategic pillars, networks and renewables.
EBITDA like-for-like reached EUR 1,150 million, +4% versus first half 2021. Generation and supply showed an improvement of +17%. Distribution EBITDA declined by 8% to EUR 874 million. Going to more detail, customer business was impacted by the net increase of the commercial sourcing cost, mainly as a consequence of the bilateral contract with the generation business still not fully passed on to customers. Including the capital gain obtained from Endesa X Way transaction, reported EBITDA increased by 17%.
Moving to a deeper analysis, we are now on slide 14 on the generation and supply businesses. EBITDA like-for-like reached EUR 1,676 million, +17% increase versus last year, including the following effects. Net effect of non-recurrents for -EUR 84 million. Higher free power margin for EUR 278 million and in particular, the generation margin increased by 492 million, mainly due to the new price reference for EUR 303 million and higher thermal output for EUR 121 million, partially offset by lower renewable contribution for about 50 million negative and other minor effects. The supply margin decreased by EUR 295 million, likewise affected by the net increase in the sourcing cost, and higher ancillary and shape cost, not fully passed on to our customer.
A positive effect on the short position for EUR 81 million. We had also positive evolution for Endesa X during the period. We have EUR 30 million negative of other effects, which includes gas and non-mainland. In particular, the gas business decreased by -EUR 71 million as a result of the volatility of the market context, partially offset by an improvement in the wholesale activity compared to the previous year. Non-mainland generation margin increased by EUR 40 million, mainly explained by fuel cost compensation accrued in accordance to new recognized fuel cost references, higher revenues associated to the increase of the activity. Fixed cost increased by EUR 29 million, mainly due to the inflationary context and higher activity.
On slide 15, distribution EBITDA dropped by 8% to EUR 874 million, mainly affected by lower gross margin impacted by previous year resettlements, lower regulatory revenue, mainly due to loss reduction incentive and others. Fixed cost increase as a consequence of repairs and maintenance expenditure in the first half of 2022. Few details on the fixed cost evolution, and I'm now on slide 16.
Total fixed cost reached EUR 1,025 million, 6% higher than last year. The increase of EUR 58 million is explained mainly by the negative inflation effect and perimeter and growth impact on cost, partially compensated by efficiency and others. In more detail, main impacts in fixed costs were the salaries increase due to the inflationary context and higher repairs and maintenance cost of distribution facility, as previously commented.
The price increase clearly affected the unitary cost across the different business lines. In the case of renewables, it was also impacted by the lower hydro output seen in the period. In distribution, unitary cost increased to EUR 45 end user, mostly explained by inflation and higher activity. In supply, cost to serve, increase was lower than CPI rate during the period.
The decrease in unitary cost in real terms is basically due to the major efforts made to optimize and digitalize the business line. In particular, we recorded 24% growth in the number of digital contracts to 7.3 million, 22% increase in the number of e-billing contracts, reaching 6.7 million e-bills. On P&L evolution from EBITDA to ordinary income, and I'm now on slide 17, ordinary net income came at EUR 734 million, down by 12% year-on-year.
In particular, we had higher reported EBITDA for 17%, which includes EUR 238 million from the Endesa X Way transaction. D&A were higher than last year by 11%, mainly as a consequence of amortization increased by EUR 51 million due to the investment effort, mainly in renewables, as well as customer acquisition costs activated, higher provisioning as a result of expected deterioration in the payment behavior for about EUR 37 million.
Financial charges and others increased mainly as a result of the net effect of lower interest payments for -EUR 65 million and the net exchange difference due to the evolution of the euro-U.S. dollar exchange rate during first half, partially offset by the update of the workforce reduction plans provisions and other minor effects. Income taxes mainly due to the higher results with the tax rate similar to the previous year.
Finally, minority increased by EUR 31 million in first half, mostly due to the better results in 12 wind generation subsidiary with minorities participation, out of which two plants have exited the regulatory schemes after having fully recovered their investments. Including the non-recurring item booked in the first half, reported net income increased by 10%.
Moving to the cash flow, and I'm now on slide 18, provision paid amounts to EUR 219 million, including the cash outflow from the provision for restructuring, digitalization, and decommissioning of previous years. Funds from operation reached -EUR 169 million, impacted by EUR 1.8 billion of the rationalization of working capital and others.
This item was strongly affected by the EUR 733 million of regulatory working capital increase during first half 2022, most of it in the non-mainland business due to the regulatory settlements at historical full cost, far below the current market. Excluding this impact, adjusted FFO would have reached EUR 564 million.
Working capital evolution, once excluded rights from regulatory settlements, would have amounted to -EUR 1.1 billion, out of which about -EUR 0.5 billion are expected to be temporary and corresponds to -EUR 0.6 billion associated to the sudden change of the energy market environment which unbalanced the equilibrium between vendor payments and client bill collections.
-0.2 corresponding to the Social Bonus settlement pending to be cashed in, and +0.2 net system charges impacted by the government measures in 2021 and 2022. We expect the above effects impacting working capital to normalize over the year, assuming stabilization normalization of the energy context and no further regulatory measures. I will now, move to the debt evolution on slide 19.
Net debt amounts to EUR 10.3 billion, EUR 1.5 billion higher than full year 2021. The increase is clearly affected by EUR 169 million of the deterioration of FFO, as commented before, about EUR 900 million of cash-based CapEx, and about EUR 500 million of interim dividend corresponding to 2021 results.
Regulatory working capital at the end of first half 2022 was EUR 1,528 million, EUR 733 million higher than full year 2021, mainly due to the higher pending compensation in our mainland. These EUR 10.3 billion net debt figures deduct the financial guarantees required for commodity management contracts, which has been materially increasing in 2022 due to volatile situation.
In that sense, gross debt has notably increased as a result of the aforementioned collaterals and is expected to normalize along the year as commodity volatility lessens. With no further regulatory intervention and stabilization of the market scenario driving the absorption of the negative temporary impact in FFO, we expect net debt to be just over EUR 10 billion at year-end, driven by the increase in regulatory working capital expectation at year-end, which is expected not to improve in the second half.
Our leverage measures as net debt to EBITDA ratio was 2.2x . Average cost of debt decreased to 1.1%, one of the most competitive financing cost of the European utilities. Despite the context of increasing rates, we expect the cost of debt to remain at attractive levels, in the region of 1.5% by year-end.
We enjoy comfortable access in the markets, having liquidity for up to EUR 5 billion and 187 million, which allow us to meet debt repayments in the coming 27 months. When it comes to the details of sustainable finance on slide 20, during the first half of 2022, we closed sustainably linked transactions for an aggregate amount of EUR 12.2 billion in a complex context where certain sustainability principles were under review.
The most remarkable transaction is the increase of the limit of our SDG 7 Euro- Commercial Paper Programme from EUR 4 billion- EUR 5 billion. As a result, sustainable finance now represents 62% of our gross debt, gradually approaching our 80% target in 2024. Now let me hand over to Pepe for its final conclusion.
Thank you. Thank you, Luca. To close this presentation on slide number 21, I would like to share some final remarks on the main achievements of the period. The resiliency of our long-proven integrated business model has allowed us to cope very successfully in one of the most complex energy scenarios and continued regulatory volatility.
Our customer strategy allowed us to attract new free market customers, over 1 million more in just one year, benefiting from energy and a wide range of valuable services at competitive prices. More than 90% of our additional renewable capacity targeted for this year is already in execution or in operation, well on track to reach the milestone set in our last business plan.
Finally, our solid track record of delivering in complex years makes us confident to navigate the risks and opportunities for the remainder of the year and achieve the EUR 4.1 billion EBITDA and EUR 1.8 billion for Net Ordinary Income guidance committed. Ladies and gentlemen, this concludes our first half 2022 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 answer all the question you may have.
Thank you. For our Q&A, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. Mrs. Mar Martínez, Head of Investor Relations, please go ahead.
Okay. The first question comes from Manuel Palomo from Exane BNP Paribas. Please, Manuel, go ahead.
Hello. Good afternoon, everyone. Thanks for taking the questions. I will stick to three. First one is an update on the bad debts situation and bad debts evolution. What is your expectation in terms of percentages versus sales and also total amount for the coming quarters in light of increasing energy bills? That would be the first one. Second one is about how you are managing in order to pass through on to final customers the rising energy prices. What percentage of total volumes have seen already a tariff update in the last, let's say, 12 months?
That would be very helpful, just to have a view on and a sense on what is left or what is the potential for increase in the coming quarters. Finally, I mean, this is something that I'm curious about. It's whether you could please remind us the criteria that the group follows in order to consider some divestments as recurring, as in the case of Enel Open Fiber last year, while others are not recurring, as in the case of Endesa X Way this quarter. Thank you very much.
Okay. Thank you, Manuel. I will try to answer your second question, and then Luca will answer the first and the last one, and perhaps will comment also on the second one. With regard to the rising energy prices, and if we transfer or not, let me say that we are not transferring the electricity price increase to our customers.
Our price-driven production is, as I have said, 100% hedged for this year and 88% for the year for the next year, the 2023, at prices of EUR 65 per MWh with our fixed price contract portfolio. During the second half of this year, we expect to complete the review of a cluster of a contract whose condition had been kept unchanged, but we will not pass on unreasonable prices. Therefore, in the second half, we are forecasting a recovery of the unitary supply margin, and we do not expect any negative regulatory impact this year. Luca?
Yes. When it comes to bad debt, as I mentioned, we have already recorded in the first half, EUR 37 million of higher bad debt on the expected deterioration of payment behavior for basically this period, but this is obviously a forecasting also for the rest of the year. We are not expecting, let me say, further deterioration. In terms of percentage of provisioning towards sales, we keep maintaining the same percentage. However, as you can imagine, with this high price scenario, the billing has increased, you know, heavily in terms of absolute volumes. Between now and year-end, we not expect, let me say, further deterioration as the one already mentioned.
As far as the third questions, basically we adjust in our Net Ordinary Income results of capital gains above EUR 10 million. Therefore, this Endesa X Way transaction is clearly not part of our Net Ordinary Income guidance. When it comes, you know, to EBITDA, we gave the like-for-like measures in order to basically net this non-recurring effect. Finally, on the second one that Pepe commented before, obviously we have, let me say, repricing activity constantly throughout the year. Some has already been executed in the first part of the year, which will bring increasing supply margin for the rest of the year.
As you have seen, we have supply margins in the first part of the year, in the first semester of EUR 1.6 MWh. We expect to end the full year in the region of just below EUR 8 MWh supply margins, which implies the second half supply margins just above EUR 13 MWh.
Okay, thank you, Manuel. The next question comes from Alberto Gandolfi from Goldman Sachs.
Mar, thank you, and good afternoon. Good evening. I have three on my side as well. The first one is still on the guidance, not much maybe dive to the bottom line. Essentially you need almost EUR 1.1 billion in the second half. Maybe can you give us a bit more granularity? I mean, the integrated margin is very helpful. May I ask, the integrated margin expands either because you can put through a tariff increase or if the procurements are going down, but in this case, I suspect it's not procurement. What tariff increase do you need to implement in the second half to get to the guidance?
The second question is, we have seen a socialization of potential shortfall of gas in Europe, agreed on a voluntary basis, yesterday at the EU. If I'm not mistaken, that would imply 7% reduction for winter for Spain. May I ask you if you have any visibility on how this may happen? Because being voluntary, I mean, would there be like a reverse auction where if you are interrupted, you get paid as an industrial customer? Is it possible you're losing revenues in winter? So can it be a headwind for you? Could you be mandated to run your combined cycles less? And can a reduction in gas perhaps impact electricity as well? Because then again, we need CCGTs to produce, you know, power, so we need gas to produce electricity as well.
Can you tell us how this could impact you? The last question. Sorry, it was a long day, so maybe I'm a bit brain dead. Can you repeat what you said about, if you don't mind, the EUR 10.3 billion definition of net debt when it comes to collateral? What are you not including in the net debt, if you don't mind me asking? Thank you.
Okay, Alberto. I will try to answer the second question, and then Luca will give you a clear guidance just to get the guidance on the third question. Talking about the shortfall of gas, the risks of the shortfall of gas. Well, in my opinion, well, it is really a risk, but it's Spain doesn't depend on the Russian gas is the first thing. Less than 10% of the Spanish gas demand comes from Russia, an amount which can be, in my opinion, easily replaced. The gas share in Spain, this 7%-12%, well, it's a measure of solidarity to the other member state. What I say or what I think is that we can.
With this measure, we can transfer this gas to other European countries due to the lack of infrastructure, either pipelines or regasification plants. In any case, what we are doing and what as far as I have understood we try to do at the level of Spain and the government of Spain is just to export more gas to France. Today we are, or those days, we are exporting more or less 11% of all the gas that comes into the Iberian hub, and it is possible almost to triple this quantity. We think that this should be our target, yes, to do that.
Trying to answer your question, well, we are not going to be, as Endesa, affected by any interruption. We don't expect any negative impact in our P&L just because this possible shortfall of gas coming from Russia and affecting all the member state.
Thanks, Pepe. On the guidance question, Alberto, we confirm our EBITDA guidance of EUR 4.1 billion for the full year, not considering the positive non-recurring items already booked in first half, which are the EUR 152 for Social Bonus, as well as the capital gain on this Endesa X Way transaction, which means that we have a better evolution of the business in the second half. Now, let me try to comment on this better evolution, so that you have the number.
This means that we are expecting basically an EBITDA increase versus first half of about EUR 500 million in the second half, which is supported by higher gross margin for EUR 350 million and a reduction of cost for about EUR 120 million in the second part of the year.
At EBITDA levels, we expect networks to improve around EUR 150 million, thanks to normalized condition and, I would say, the absence of negative previous year settlements which affected the first half, while the generation and supply EBITDA will increase by about EUR 300 million, mainly from the expected improvement in the Iberian free power margin, which is resulting from a rise in the underlying price, also driven by the repricing activity I commented before in supply. We estimate unitary margin for the second half to reach above EUR 40 MWh, which is very similar as well to the performance we had in the second half of last year. Supply margin, as I commented before, above EUR 13 MWh.
Now, from EBITDA to Net Ordinary Income, we expect D&A to basically be EUR 80 million lower vis-a-vis first half in the second part of the year and to lead to a D&A guidance for the full year of EUR 1.7 , and this basically implies an improvement in net income in the second half of about EUR 400 million. That's how we basically get to our guidance, both EBITDA, net non-recurring, as well as Net Ordinary Income. On the third question, I commented that we have basically an increase in gross debt vis-a-vis net debt, which is substantial. We are reporting EUR 10.3 of net debt and about EUR 14 billion of gross debt.
The increase is driven by basically the collateral behind our derivative hedging with exchanges, which are basically public markets. That is accounted in the differential between net debt and gross debt. The only, I would say, adding items in the two metrics is about EUR 200 million of cash available.
Okay. The next question comes from Jorge Alonso from Société Générale.
Hi. Good evening to everyone. I have a couple of questions, please. The first one was related to the improvement in the generation and supply that you are mentioning for the second half. The question is, can we assume that in the second half, the company will be able to reach the level of profitability in order not to trigger the clawback? That in essence, the level of profitability in the contract with pricing level can be maintained for 2023? The second half improvement can be maintained in 2023 or there is still room for further repricing in 2023 at the levels that you are thinking in the second half?
If there are still volumes that will be positively impacted in 2023, thanks to this repricing that you are mentioning for the second half. The other question is regarding the distribution grids. We have seen some weakness in the first half. You are mentioning that you do expect a recovery in the second part of the year. Can you explain a little bit what I mean what the weakness was related to? If this will be reverted? If that could cause you to reconsider to accelerate or not investments in the distribution grids and shift that on to other areas like renewables, for example? Thank you.
Okay, Jorge. I will try to give you some color and then Luca will go deeper in this, in these two questions. First of all, the improvement in generation and supply are mainly, if we are not going to trigger the gas clawback. First of all, let me say, as Luca said, the supply margin. First of all, our own inframarginal production, that is, hydro, nuclear and renewables, we are selling this electricity at the price of EUR 65 per MWh . That is the first thing.
The second thing is that just because I would like to say that given the high sourcing cost of the first half of the year to mitigate part of the supply price increase to our customer we have absorbed in our supply margin part of this increase. That is the reason why Luca has said that with this higher sourcing cost we have not passed on to customer these prices. Having said that it is not sustainable, let's say that, just to maintain this very low level of margin in our supply business.
That is the reason why what we have said is that this first half and in the rest of the year, we are reviewing the prices, the lowest prices that we have with our customer trying to renew this contract, and to increase our margins somewhat. In any case, Luca has said that the final supply margin will be lower than EUR 8 per MWh, which it's still lower than what it is reasonable. That is the reason why we don't expect any negative impact with the clawback. Yes, in the next year, we will see, I mean the year 2023, we will see what happen or what not happen. We will.
We should take into account the evolution of the cost of the sourcing, and we have many levers just to manage the situation in the benefit of our customers and in our own benefit. That is the reason why we're improving or increasing these margins. Now, Luca, if you want to add anything.
Sure. On the second question on distribution grids, I commented that, you know, the expectation for the second half. Basically, we are guiding to an EBITDA of EUR 1.9 billion for the full year, which is just EUR 100 million lower than what it was expected, mainly on the first half evolution that I have commented already. Now, what do we expect in the second half is basically recovery, especially in other revenues line in distribution, which is mainly coming from clients' contribution. That should allow us basically between the regulatory margin and the other revenue line to reach the guidance that I was commenting before. On the first topic, I just, you know, confirm what Pepe said.
You know, that the pricing will not, you know, trigger for us, clawback for this year.
We have now, Javier Garrido from JP Morgan.
Thanks a lot. Good afternoon. Actually, there is only one clarification left. When you have talked about the guidance for 2022, you mentioned that you are excluding the capital gain on Endesa Way, and I understood you are excluding also the Social Bonus recovery, for you to get to EUR 4.1 billion. On the other hand, if I understand correctly the numbers that Luca mentioned, if you are looking for a EUR 400 million increase in net income in the second half versus the first half, that would make EUR 1.1 billion. Therefore, in order to get to the EUR 1.8 billion ordinary net income target, you are including in this ordinary net income target the recovery of the Social Bonus.
I just wanted to clarify if my understanding is correct, that the recovery of the Social Bonus is not needed to get to the EUR 4.1 billion EBITDA target, but is needed to get to the EUR 1.8 billion ordinary net income target. Thank you.
Thanks, Javier, for the question, which I think clarifies for everybody. Basically, you are right. The EBITDA guidance is net of Social Bonus and net of the capital gain on the Endesa X Way. Net Ordinary Income below EBITDA, for how it is defined, includes basically the Social Bonus.
Now, this Social Bonus below EBITDA for us is enough in order to cover the increase in D&A that we are expecting for the full year, as well as the evolution of minorities that I have commented for the first half, that we are expecting basically to double for the second part of the year. That's how basically we are reaching the EUR 400 million in the second part of the year at net income level.
Okay, thank you. We are done with the question from the call, and I have just one question from the web that is, it comes from Jorge Guimarães from JB Capital, and is in relation to the announced tax on extraordinary profits, and what would be the potential impact of an Italian-style tax?
Well, Jorge, first of all, we don't know the details of this proposal. First of all, to make a proper assessment, we must wait to know the scope, to know the mechanism, to know the tax. Let me say that in our case, not only there are no extraordinary profit, but also the current crisis is reducing the result of all the electricity companies. As we have said, we have sold our hydro, nuclear and renewable energy at a price of EUR 65 or below EUR 67, established like reasonable by the government. We assume that the tax would not apply to earnings generated by regulated business.
On the other hand, the European Commission stated that the new tax should not be excessive, should not jeopardize investment in renewables or distort the CO2 market. With regard to the Italian one, we really think that it's absolutely different and we don't know how this methodology could affect us. In any case, Luca, could you add anything?
No. Just adding that, for us, it's basically impossible to give any estimates without knowing how the measure will be drafted. At the moment, we cannot really comment on estimates of this impact.
Okay, that's all. Thank you for participating in this conference call. Just remind you that our team is available as always to help you in any other question you may have. Thank you again, and have a nice summer break.