Hello, good morning everybody, and welcome to our full year 2024 results presentation, which will be hosted, as usual, by the CEO, José Bogas, and the CFO, Marco Palermo. Following the presentation, we will have the usual Q and A session open to those connected on the call and on the web. Thank you, and now let me hand over to José Bogas.
Okay, thank you, Mar, and good morning everybody. Let's start with the highlight of the period, which was marked by significant achievements and solid business execution. In 2024, we recorded a strong financial performance across all businesses, delivering above the target revised upwards in November 2024. EBITDA grew by 40%, while net income increased by 2.5 times versus last year. Solid cash generation with FFO reaching EUR 3.6 billion, showing a healthy FFO to net debt ratio at 38%. And lastly, in light of the strong result achieved, we will propose to the next Annual General Shareholder Meeting a dividend of EUR 1.32 per share, implying a dividend yield of around 6%. Slide number four illustrates the year on year evolution of market dynamics. In 2024, average price in the Iberian Wholesale Electricity Market was EUR 63 per megawatt hour, 28% down year on year, in line with the evolution followed by the gas and CO2.
This evolution was marked by a high seasonal and intraday volatility, strongly influenced by the larger share of renewables in the mix that already represents around 56% of the system total output. Solar photovoltaic generation setting new records in Iberia, reaching 44 terawatt hours, while hydro production was 36% higher, and reservoirs are at 56% of full capacity. Mainland electricity demand has shown a steady recovery, leading to a 1.5% growth after adjusting for weather and calendar effects, while Endesa's figure remained flat. In the next slide, we show some of the key regulatory developments in 2024, where clearly we saw improvement in a number of sector claims, such as the implementation of the capacity market, the non-mainland generation tender, or the rejection of the 1.2% levy. But I would like to elaborate on some key topics requiring further development.
Many countries in Europe have decided to reverse the commissioning plans, such as Belgium, or even propose new development programs like Italy. In our country, there have been calls from different sectors to rethink the closure of nuclear fleet. We believe that now is the right time to analyze the nuclear protocol. The primary consideration has to be what is best for the system and the economy in general, ensuring security of supply and helping to meet emission reduction targets whilst offering competitive prices and strengthening our independence from volatile commodity markets. Any discussion on the future of nuclear energy should be in line with government's energy policy and consider the financial sustainability of the plans by reviewing the current taxation of this technology, which is heavily penalized compared to others.
In relation to the distribution remuneration update, we are still awaiting the initial proposal from the regulator, and we are confident on a supportive outcome aligned with both energy policy targets and the remuneration schemes of our neighboring peers. Modernizing and expanding the grid is essential for a sustainable and secure energy future. This involves integrating renewable energy, enhancing grid resilience and market security, and increasing capacity to meet growing demand from the electrification of key sectors. Given the high number of access requests, mainly from the industrial sector, it is crucial to develop a regulatory framework to expedite procedures, giving priority to the most feasible projects. Moving to the operational parameters of networks, and I am now on slide number six, investment in networks is slightly increased by 2%, allowing us to ensure good quality indicators while keeping our regulated asset base stable.
Grids are the cornerstone of the energy transition, and we need to accelerate the investment path to meet the very ambitious targets set out in the National Energy and Climate Plan, to increase grid resilience and security of supply, and to enable the integration of the growing number of new connections requested. None of this would be possible without an adequate improvement in the remuneration scheme. On slide number seven, in line with our strategic pillars, investment in wind and solar are slowing down, focusing on the highest value asset. In this sense, and leveraging on our integrated business strategy, yesterday we closed the deal to purchase 0.6 gigawatts of hydro asset from Acciona. As of 2024 year-end, 78% of our mainland capacity and 86% of our production is based on CO2-free sources.
It is also important to emphasize the significant role of renewable energy during this period, with a 25% output increase driven by a substantial boost in hydro production, resulting in a 51% year on year rise in output. Now, on slide number eight, we detail the main drivers of the liberalized power sales performance. The historically high churn rate at the end of the year reflects a highly competitive environment with a high degree of customer mobility. As advanced in the capital markets day, the CMD, Endesa is successfully managing this scenario by focusing in strategy on retaining and building up the loyalty of high-value customers while attracting new ones through our commercial channels with appealing offers and programs. Following these guidelines, in the last quarter of the year, we even added new customers in the liberalized segment.
This commercial strategy has resulted in a decrease of B2B index sales and a relevant increase of high-value fixed price sales in the period. Deep diving into the performance of our integrated strategy on slide number nine, unitary free power margin reached EUR 55 per megawatt hour, much in line with the previous year in absolute terms and with the forecast provided in our CMD. If we take a closer look at the different moving parts, first, some improvement of supply margin in line with expectation, benefiting from cheaper sourcing costs in a scenario of lower prices and high volatility. Second, generation margin decrease due to the expected normalization of thermal and nuclear load factor, partially compensated by a better performance of renewables. And finally, positive result in solar position management returning to more moderate levels on lower volumes.
Taking a look now on gas business on slide number ten, total gas sales were 8% down, mostly related to lower liberalized sales and the progressive normalization of CCGT load factors, partially offset by higher gas portfolio management activity. So, the improvement of gas margin recovering from last year's extraordinary negative condition also impacted by the outcome of the Qatar Arbitration, and now I will hand over to Marco, who will detail the financial results.
Thank you, Pepe, and good morning, everybody. I would like to start, if I may, by congratulating our CEO on a special day today, his birthday. So to start with the celebrations, the excellent results we present today in terms of both EBITDA and net ordinary income, which are above the targets announced to the market. EBITDA reached EUR 5.3 billion, up 40%, while net ordinary income amounted to EUR 2 billion, more than doubling the results achieved the previous year. The comparison of both periods is greatly impacted by the solid results achieved this year, while 2023, as you may remember, was penalized by regulatory interventions as well as the extraordinary negative results of the gas business, as mentioned before.
Finally, a sound cash generation in the period, which, excluding the aforementioned extraordinary gas arbitration paid in Q1 of 2024, is over EUR 4 billion, which represents a conversion ratio, FFO on EBITDA, of more than 75% for the period. Turning now to the analysis of the key EBITDA drivers, and I'm on slide 13, the strength of our result is reflected in the growth of all business lines. In distribution, 15% EBITDA increase, as we will explain later on. The integrated business of generation and supply increased by 45% on the back of the strong performance in customers, including power and gas, with a growth in EBITDA above 40%. The larger contribution from the renewable business, which increased by 19%, largely due to higher output during the period, and improvement in conventional generation, mainly recovering from the gas arbitration award recorded last year.
The structure line in gray color reflects the 1.2% levy impact in both years, with the final figures of EUR 138 million for 2024, and the Social Bonus sentence refund booked this year. The impact of the 1.2% levy in 2024 was adjusted following the inspection of the levy, which concluded with the exclusion of several items from the tax base initially considered. Moving into a deeper analysis, we are on slide 14. Grids' EBITDA reached EUR 2 billion, up by 15% versus previous year, driven by a gross margin increase, mainly explained by the positive outcome of the final remuneration for the year 2020 recorded this year, which compares with last year's negative resettlements, and second, the improvement in fixed costs due to the adjustment of the workforce restructuring provision booked in 2023, and the reversal of the provision related to the sale of the optic fiber network.
Generation and supply EBITDA, and we are now on slide 15, increased by a sound 45%, reaching EUR 3.3 billion, mainly driven by the gas business recovery from last year's exceptionally negative situation, as already explained, and while the free power and other remained basically almost flat. Finally, stability in fixed costs thanks to our continued focus on efficiencies. On slide 16 now, our focus on efficiency is progressive in line with our expectations. Total fixed costs were 5% down versus last year, with efficiencies absorbing both inflation and growth. These savings are built over a cost containment plan on the back of a more efficient organization with a reduction of average headcount and operational optimization. Moving now to the analysis below EBITDA, and I'm on slide 17. D&A increased versus previous year, driven by higher amortization due to the investment effort.
Net financial results improved mostly on the back of lower average gross debt, but in a context of higher interest rates. And finally, tax rate reached 27%, affected by the non-deductibility of the 1.2% temporary energy tax. As a consequence of the above, net income is up by a sound 2.5 times, while net ordinary income doubles the amount achieved in the previous year, visibly improving the net ordinary income to EBITDA conversion ratio. Going to the next slide on cash generation, FFO stood at EUR 3.6 billion. Focusing on the moving parts, there has been a strong EBITDA growth, as seen before. Negative working capital of around EUR 0.4 billion, mostly affected by the payment of the Qatar Arbitration in Q1, while the regulatory working capital remained stable. There has been a favorable evolution of cash out for taxes, while financial charges were almost flat compared to last year.
Excluding the aforementioned exceptional gas arbitration award, adjusted FFO would reach more than EUR 4 billion, that is EUR 1.2 billion increase versus previous year, proving the solid cash generation throughout the period. On slide 19 now, net financial debt landed at EUR 9.3 billion, an improvement of 11% compared to previous year. On top of the strong cash flow contribution, we cashed in around EUR 800 million from the partnership with Masdar, totaling EUR 4.4 billion funds that more than covered dividend payments and CapEx needs. Finally, our strong commitment to a strict financial discipline has resulted in healthy credit metrics. The FFO to net debt ratio closed at 38%, higher than expected in the Capital Markets Day, and even above the target for 2027, which was 37% for that year. Regarding the debt maturities, I'm now on slide 20.
The financial position remains at solid level, with an average life of debt of around four years, ensuring adequate support for the company's business plan in a challenging environment. Available liquidity amounts to EUR 6.5 billion, providing ample coverage for debt maturities of up to 35 months. All the above is reflected in the recognition by the rating agency in comfortable credit metrics, paving the way to face the challenges that lie ahead in the coming years. Let me now hand over to Pepe for the final conclusions.
Okay, thank you, Marco, and thank you for your birthday wishes. The resiliency of our business model, the operating performance, and all the managerial action we put in place allowed us to deliver sound results. In accordance with our current dividend policy of 70% payout of net ordinary income, we will propose to the Annual General Meeting a dividend of around EUR 1.32 per share. This dividend represents an increase of 32% versus the dividend distributed against the previous year and is significantly above the guidance committed to in our business plan. Indeed, the 2024 total shareholder return amounted to almost 18%. To conclude this presentation on slide number 23, I would like to share some closing remarks. First, in 2024, our company achieved outstanding results, generating solid cash flow that strengthened our financial position and allowed us to invest in growth opportunities and face economic challenges with confidence.
Second, once more, we demonstrated the resilience of our business model, delivering consistent economic and financial results. This places us at an optimal point to continue advancing our business model, focusing on operational efficiency and positioning ourselves for sustainable growth and value creation for our stakeholders. Going further, we are confident that a supportive regulatory environment, providing the stability and predictability necessary in the current context, will be a catalyst for investment acceleration. Thank you for your attention, and let's now move to the Q and A.
The telephone Q and A session starts now. If you wish to ask a question, please press star five on your telephone keypad. If you change your mind, please press star five again on your telephone keypad. Please ensure your phone is not muted.
Okay, we start now with the first of our analysts, Peter Bisztyga from Bank of America. Please, Peter, go ahead.
Hello, thank you for taking my questions. So, three, if I may. Firstly, I'd be interested to hear your expectations for the capacity market and really how significant that could be for your business, with all of your mainland CCGT and hydro assets being eligible for it, for example. And then the second question is, could you just sort of remind us how significant a CapEx opportunity for non-mainland generation tender could be if that comes through, as you hope? And then finally, forward power curves for gas and, sorry, forward curves for gas and power have been very volatile over the last six months or so. Interested to hear how that's impacted your expectations for your sort of short position in 2025 and also your gas margin in 2025, perhaps versus what you were thinking in November. Thank you.
Okay, thank you very much. With regard to the first question about the capacity market mechanism, well, as you know, the Ministry has issued a draft order for consultation that creates this capacity market. For us, the proposal is positive, and it is an important step for the Spanish energy sector. Having said that, we don't know exactly the figures of the payments, capacity payments that we will receive, but what it is clear is that in this market in which we are increasing renewables and then the intermittency of this generation, it will really reduce the production of other technologies that should support these renewables. So it would be needed some kind of support to these other technologies. We will see at the end, but it's in principle a positive proposal. With regard to the non-mainland, well, the final resolution, if I'm right, should be published by April.
Let me say that delays cannot be discarded, as always. We have presented more than 130 projects. Most of them are aimed at replacing obsolete equipment, and our final solution will be subject to the adequacy of the remuneration. Review of the remuneration parameters are still pending. Marco, could you?
Thank you. Thank you, Peter. So basically, on question number two, you were asking what the potential CapEx on the mainland is up to EUR 1 billion. And regarding question number three, that was related to the volatile forward curve, two things here. On 2025, as you can see from our presentation, we are basically fully hedged, both on gas and power, and it is almost also for 2026. But despite this, the latest forward that we are seeing is still in the range of our scenario.
Thank you.
Thank you, Peter. Next question comes from Goldman Sachs, but I'm not sure if it's Alberto Gandolfi or Jen Evans. In any case, go ahead, Goldman.
Thank you, Mar. Alberto. It's Alberto Gandolfi. I also have three, please. The first one, I was wondering if we can talk about the leveraging potential a bit more in depth. You have these projects coming now from the mainland. There's a potential organic upgrade in power distribution, and this has been reported in the press as a potential bidder for some renewable assets in Iberia. So I guess, where would you see a comfortable level of leverage, and how quickly do you think this could be achieved? And maybe can you talk about organic growth versus external growth and how this would reshape your mix? Just trying to understand when I put together organic vis-à-vis acquisitions, where are you trying to allocate the marginal Euro, so to speak?
The second question is, by the way, sorry, I should have had better manners, but I wanted to wish happy birthday to Pepe. You make our life and our job way more interesting. Thank you so much, first of all, for the help, and I hope you have a special day. Sorry, second question. In case, I'm sure you've done some analysis about this. In case we were to see Russian gas flows resume towards Europe, in case we were to start to see a normalization in power prices, I totally appreciate that 25, 26 are largely hedged. But what would happen to your business if we were to start to see power prices below EUR 15 or EUR 45 or so in Iberia? And how could you protect an integrated margin at EUR 55 a megawatt hour when actually the baseline is way below?
So probably achieved prices would be there or thereabouts. So what is your contingency plan on this scenario? And the last question is, sorry, actually, Pepe, you have been an advocate for the attractiveness of Iberia and the potential for inflecting power demand, the potential for data centers. We have seen that you have submitted, you and the rest of the industry have submitted more than 20 gigawatts of connection requests to the grid from data center developers. I was wondering, A, can you update on this figure? Has it gone up? And B, how much of the 20 gigawatt or whatever number is going to be now you think is real? Is it 20%? Is it 30%? Is it 50%? I think this could be a very powerful driver for power demand in the region, and so I wanted to hear your thoughts here. Thank you so much.
Okay, thank you, Alberto, and many thanks for your wishes. I will give you some color, and then Marco will give you the specific details. With regard to the leveraging in which we will feel comfortable, we already have said something around 2.5 times. So just doing a mathematical equation, let's say that we have room for EUR 3 to EUR 4 billion euros in the future. That gives us the possibility of organic investment or even acquisitions. It would depend. We have done that, not only buying like the one that we have done with the hydroelectric power plants of Acciona, but also sharing or selling some solar photovoltaic production just to improve the capital allocation and to improve the return of these assets, reducing also the risks.
With regard to the prices and the Russian-Ukrainian conflict, let me say always that we talk about these things, prices. There are a lot of volatility and a lot of changes. Just a few months ago, we gave our price assumptions. In January, I would say that commodity forward prices were above our assumption. Perhaps the odds of a ceasefire in the Russian-Ukrainian conflict have pressured the prices down. In any case, the market is very nervous, and lately it has been very volatile also. We expect price to recover. The gas is more or less in line with our assumption, and it is still that is below. But we are used to handling this situation, and really we will see what happens. You asked me for an update in the increasing demand, let's say that.
First of all, what we have seen during the last year, that is the year 2024, is a huge increase in the connection requests. Today, if we take into account the last five years, that is from 2020 to 2024, the main distributors, so that means we are not including the transport request, the main distributors have received 122 gigawatts at high voltage and medium voltage, increasing from less than three gigawatts in the year 2020 to more than 67 gigawatts in 2024. Roughly one-third are data centers and another third new electrified industry and one-third traditional industry. Out of the 122 gigawatts total figure, around 30 gigawatts have been awarded. This is the last figure that we have. While more than 40%, that is more than 50 gigawatts, were declined due to the lack of grid capacity.
The 30 gigawatts granted would mean doubling the existing high voltage and medium voltage capacity in Spain. Only in the year 2024, we have received the distributor something around 70 gigawatts of connection requests, and the TSO has received 50. That is a huge amount, something around 120 only in the year 2024. And you should compare this figure with the total contracted capacity connected to the Spanish grid by the end of this year 2024, which was 180 gigawatts. So it's a huge increase in a possible huge increase in demand. Let me say, talking about the distributor, even if only 50% or 25% or one-third of the 30 gigawatts granted by the distribution companies were successful, we would be talking about something between 50-70 terawatt hours in the next five years, which compares with the 30 terawatt hour increase in industrial consumption contemplated in the PNIEC.
We should be a little bit cautious with these figures because it could be duplication, speculative requests, projects that may not be feasible, etc. But what these figures do show, however, is a clear trend of increasing demand. So what we are seeing is an important increase in demand beyond the year 2027. Many thanks again for your wishes, Alberto and Marco.
Hello, Alberto, so on question number one, of course, Pepe is correct. I mean, given that we are trying to steer towards regulated CapEx, of course, I mean, I guess that probably a correct level of leverage would be something between 2.5 and 3. With 2.5, it's almost EUR 3.4 billion of space. Our preference is, of course, for our development, for the development of the grid. We really hope that there will be the correct framework, attractive framework just to foster and to speed up on investment there and somehow serving the country for this industrial transformation, this industrial reindustrialization somehow that could be possible given the strong demand for new industry in the country. Regarding the rest, I mean, the inorganic, of course, we look for things out there, and we always make the comparison between the make or buy.
Frankly, I mean, we look for many things, but then when it comes to price, it's not very easy today just to find assets at a fair price. And regarding the rest, I guess that frankly, Pepe has been extensively answering. Thank you.
Thank you, Alberto. We move now to Jorge Alonso from Bestinver.
Hi, good morning and congratulations as well on my side, Pepe. I have a couple of questions, please. The first one is regarding the nuclear and the potential changes. Just to be very specific, if there is any legal impediment for the companies to ask for an extension of the license or it is, and then the first move should be done by the government just to understand what is the situation and especially if the deadline to extend Almaraz, I mean, can be reached or not. The second one is your view on the strategy in renewables. It seems that you are moving out from solar battery, moving in obviously a hydro battery as well, wind. Is that because you see still that for whatever reason batteries will not be in the system and then solar assets are not desirable for your portfolio?
The last one is you can provide the impact of the tariff review in 2020 networks. What has been the impact and if that can be considered as recurrent? Thank you very much.
Okay, Jorge, and again, thank you for your wishes. With regard to nuclear, I'm being very concrete. There is no any legal impediment just to ask for life extension, in my opinion. Nevertheless, only potential rethink of the nuclear phase-out timeline would require the review of huge fiscal burden affecting this technology. This is the first thing that I would like to say. Having said that, any extension of nuclear power life must be, at least in my opinion, in line with the energy policy that is in line with the government. We have long spoken out in favor of nuclear power out of intellectual conviction, as I used to say. We have shown our willingness to enhance the dialogue with the ministry. We will see. But being concrete, there is no any impediment to ask for life extension.
The deadline of Almaraz would be something by the end of this year 2024. I will pass the second and third question to Marco.
Thank you, Pepe. Hi, Jorge. So basically, question number two, strategy on renewables. Here, we're not against solar, but it is true that yes, we do see more risk on the solar technology vis-à-vis the wind and in other cases vis-à-vis the hydro. That's why we have been moving somehow shifting towards those technologies. We think that in the future, probably there will be no solar like we know today, but there will be some solar with the attached battery. So very soon, we think that we will see this switch. When we come to the question number three, that is the regulation of the adjustment on the regulation on 2020, this is a non-recurrent item. So it has been booked in 2024, but we do not expect any other extraordinary in 2025 and onwards. Thank you.
We move now to Jose Ruiz from Barclays.
Yeah, good morning and happy birthday, Mr. Bogas. Just two questions. First of all, follow up on Jorge's question on nuclear. Which level of levies would you be ready to extend or ask for extension of useful life? Of course, the optimal scenario is zero, but is there any level like 50% of what you're paying today, EUR 20 per megawatt hour? Is there any threshold where you would be happy to extend? And secondly, question to Marco, if you can share with us the gross margin for the short position in 2024. Thank you.
Okay, thank you, José, for your wishes. And I will give the question to Marco to say the level in which we will feel comfortable and also the short position.
So sorry, on question number two, gross margin on the short position, gross margin. You remember that this was something around 500 in 2023. It has been normalizing basically around 2024 to EUR 300 million. And we are now seeing, of course, this even more normalizing for 2025. On the level of levies, we would be comfortable. We think that currently, I mean, if you look at the forward curves, they are around 55 euro megawatt hour. The full cost of a nuclear is 65 or even a bit higher. And of this, a big component is levies. It's more than 20 euros. So I guess that in order to make this at least aligned with the forward, they should come down by at least 10 euros per megawatt hour. And just to make it profitable, probably a bit more. Thank you.
Next question comes from Pedro Antonio Alves from CaixaBank.
Hi, good morning. I need to join also the congratulations to Mr. Bogas. And I have two questions, please. The first one is on the outlook for 2025. You have the CMD guidance of between EUR 5.4 billion and EUR 5.6 billion in terms of EBITDA, EUR 1.9 billion and EUR 2 billion for net income. So you have finished this year, 2024, at around EUR 2 billion net ordinary income. So the question is, what can be the main delta here or the moving parts for 2025? And if you are in a position eventually to reveal this range of the guidance or tell us if you are more right now seeing the high end or low end of the target. The second question is on the Spanish PPA market. How do you see the market currently in terms of volumes and prices?
I think there was a recent report of a decline in PPA prices during the month of January. So how is currently your playbook in terms of the trade-off between buying PPAs or building the renewables? Thank you.
Okay, thank you, Pedro. So on question number one, yes, of course, if you look at the numbers in 2024, they look like in line with 2025, no? But if we look at the basic concept, the basic moving parts, what we do expect there. I mean, we expect, of course, an increase in EBITDA, and this increase in EBITDA would mainly come on the gas side because, of course, this has been almost normalizing in 2024, but there is still space. I mean, we made the hedge before, so there is still space for an improvement in 2025. While on the power side, we would expect to be all in all in line. When you go down to the net income level, you should expect, of course, higher D&A because we are ramping up our investments.
And you should also expect on the other side some more minorities because, of course, the partnership that we have been doing, they kick on and you have to take into account the component of minorities there. So that's why at the end, all in all, we land to something very similar in terms of net ordinary income. And regarding the question number two, buying a PPA, the environment is frankly so volatile that for the time being, basically, we're not moving, I would say. So I mean, we're still building, of course, at a slower pace, our renewables and being much more selective than in the past. And also because still, I mean, we have seen some demand increase kicking in for the first time last year, but not on our territories.
We still suspect that the increase in demand coming from the new capacity will still, I mean, will still not be visible in the short term. Thank you.
We move now to Javier Garrido from JP Morgan.
Hi, good morning. And I would join the happy birthday wishes to Mr. Bogas and also take the opportunity that we are in that festive environment to ask on Marco's comments just made on the 2025 net income guidance. I mean, given that you have a meaningful beat in 2024, don't you feel more comfortable about seeing also a beat on 25, given that you just confirmed that you can see the EBITDA growth coming from the gas business? He's saying, just to put it in a, let's say, appropriate question way, is the risk of the guidance clearly on the upside after what you deliver in 2024? And then the second question would be on the Nigerian Gas Arbitration Case. You can let us know what is going on there.
Finally, on your hedging strategy, you've commented a lot about gas and power prices, but should we expect to see some change or a more accelerated approach towards hedging for 2025? I just look at your 2026 hedging as at the end of October, you were at 70% hedge. You are now at 75% hedge. In four months, not a meaningful move. Are you planning to accelerate your hedging for 2026 or you are comfortable with a very gradual approach for the next few months? Thank you.
Okay, Javier, answering your wishes, thank you very much. That is the question that I think is directly to me, and with regard to the other question, I will pass to Marco just to answer the questions.
Okay, so basically on first question, hi, Javier. 2025 guidelines, I mean, we confirmed that. Of course, I would say that we're not on the low end of our guidelines because for the time being, the 1.2% tax levy has not been somehow extended. But on the other side, we do see a normalization on further normalization on the short position. Regarding question number two, there is, I understand, the arbitration on Nigeria. The risk of arbitration with Nigeria is not yet present. So on question number three, regarding whether we would like to accelerate our hedging on 2026, I would say that we are comfortable with the rate we are keeping right now, so we're not in a rush to do it, frankly. Thank you.
Thank you, Javier. We have now Javier Suárez from Mediobanca.
Thank you, Mar. Good morning, good morning, hola, and congratulations to Mr. Bogas as well. Three remaining questions. The first one is a kind of philosophical question on the reasons behind the delay in the approval of the new regulatory framework by the Spanish administration. To what you attribute this delay, is that because demand increase may be significantly higher than initially forecast, it should be a sense of urgency? Because my impression is that looking at page number 20 or slide number 23, is that investment acceleration that you are targeting for 2025 subject to that regulatory review? So the question is, if that regulatory review is taking longer than initial expected, that may affect the CapEx allocation that you have announced in 2025? That means a significant step up versus previous year.
That would be the first question and link to the guidance that you have and the possible implication of that capital, excuse me, regulatory framework update on your capital deployment. Then the second question is also on the sector and new storage facilities. It has been mentioned during the call, the riskiness attached to solar generation and the lack of investment so far on new storage facility. What the sector needs to invest on new storage facilities, and when do you think that these new storage facilities are going to impact the structure of the Spanish electricity market? And the third question is on a slide number, I think it was eight, on the supply business dynamic. I just wanted to have your view on how do you expect the market evolving into 2025.
2024, we have seen lower sales, the increase in the free price sales that you make on the market, and the progressive strategy of focusing on higher volume value customers. These trends should be continued in 2025, and what should be the impact for your profitability on this activity next year? Thank you.
Okay, thank you, Javier, and many thanks again for your wishes. Reason of the delay, well, there is no reason. It's the normal thing that happened in Spain with the regulation. Let me say that is the first important theme. With regard to the distribution regulation, well, the first draft of the financial remuneration, it was forecasted for the last December. We don't have yet this figure. During this first quarter, we should have the methodology review, which is today very complex and should be really improved. Other thing, we don't have new news on the investment cap modification. Having said that, let me say that first of all, what we have asked in our strategy plan and business plan is remuneration, financial remuneration of 7.5%. That includes all. That means it's not only the financial remuneration, but the financial remuneration and the rest of remuneration parameters.
So that means the increase could be equal to the 7.5. And why? Yeah, just because the different methodologies of the European regulators were applied in Spain, the average financial remuneration could be between 7.3 and 8.7. So we ask for that. What we think is that you know that it was a ministerial order in the policy for the future or something like that, that the ministry said that they would like to change a little bit the concept of being the CNMC only to take care only about the level of the cost, but also to incentivize this energy transition to achieve the goals that we have in the energy transition. I think, I think, but it's my personal opinion, that the CNMC are trying just to look for what should be this figure.
I think it was yesterday when Redeia, the Red Eléctrica of Spain, said that the lower level should be something around seven. I think we feel comfortable between seven and 7.5, taking into account the rest of the remuneration that we would see. But the delays are the normal thing here in Spain that we should resolve for we ask for resolve. Also, let me say, we are waiting for the island new auctions and the review of the remuneration parameters of the island, and we're waiting also for that. With regard to the storage facilities, let me say that when should be put in place these storage facilities. The year 2024 is the first year that we have seen some curtailments.
So that means, and if you look at the PNIEC, then in the year 2030, if I'm right, there are something around 20 terawatt hours of curtailments. That is something around 10% of the total output of wind and solar. So that means that we need just to put this storage capacity just to balance the production and also to increase the security of supply as soon as possible. Nevertheless, what I think is that it would take some time just to put all these storage and batteries, and also, on top of that, we would have some problems with the curtailments in the year 2030. With regard to the supply business dynamic, you are right in the sense that we are focusing on higher value customers. That means that higher value customers and also fixed prices instead of index prices, well, that is our strategy.
We would like to be closer to the customer, offering solutions to the problems. And well, we will see what happened. What we have seen in the last year, it's a huge competition. And I would say not also in prices, but also just because in the commercial campaigns that we have seen, well, it has no sense. The share of return is something around 26%. Two or three years ago, we had 14. So that means that it is a good thing, this high, very high capacity, but there are, in our opinion, something that should be changed because there are many speculations in this market.
If I may, thank you, Javier. So on the first one, that was actually the potential, the possible implication of this delay in receiving the draft. I mean, we always knew that this, for good or for bad, would be known by year-end. So I guess that our duty and our increase of CapEx basically starts in 2026. Our duty is to be ready for that. So to prepare for the increase in CapEx, we will know by year-end what will be the terms for this, and then eventually whether we will really start spending or not for next year. And regarding the new storage facilities, I guess that, of course, I mean, the moment seems closer for batteries kicking in. I guess that, of course, the Capacity Market will be something that will help that.
Of course, I mean, the lowering of the cost of the batteries is somehow making it closer to a real development in the country. On the other side, let's not forget that the batteries basically jeopardize themselves. So they live off the spike on prices of daily prices. The more you put, the more this spread goes down. Question number three, on the market evolution, as Pepe was saying, we still expect 2025 with a very high level of competition. On the other side, as we have been doing on 2024, we've been focusing on the customers that have more value, have more value for us. Therefore, we expect, as you have seen, we publish in slide nine supply margin around EUR 17 per megawatt hour, and we expect this to be in line also basically in 2025. Thank you.
We have now Rob Pulleyn from Morgan Stanley.
Yeah, hello. Yes, thank you. May I also add my birthday wishes there to José? Look, there's been a lot of questions. So firstly, a bit of a nitty-gritty one. May I ask in the 2025 guidance, how many months' contribution was assumed from the hydro acquisition, given that is now closed? And just two quick follow-ups, if I may. We discussed the renewables business, but unless I missed it, there wasn't, I think, an explanation as to why there was around a EUR 90 million impairment on solar, if you could just elaborate. And thirdly, to revisit the integrated margin earlier, given obviously the hedge book is 55% for 2027 and the forward curve appreciating, it's moving around a lot. How you consider risks to the integrated margin guidance in a couple of years' time, given all those moves in power prices. Thank you very much.
Okay, thank you again for your congratulations. Marco, could you answer?
Hi, Rob. So question number one regarding hydro. Basically, I would say yes, almost in line with what we were expecting, probably a month, a month earlier, but in line with what we were expecting. Question number two regarding the impairment on renewables. I mean, this is coming from the fact that, of course, as we said, we are focusing our CapEx, we are switching our CapEx from renewables more on the regulated side, so on distribution. And of course, this means that on renewables, we became more selective. On top of this, of course, there has been that all the development of renewables has been following blocks.
So, there are dates for a lot of renewables where we have been, of course, the big majority has been getting the approval and the permits, but some of those do not, or they get it with somehow higher requests in terms of, for example, I don't know, lines that are not on air, but should be underground and things like that, so taking into account all this, we have been somehow being more selective. We've been somehow decided just to, of course, impairing all those projects. And I guess that this is something that somehow is the result of this switch. Thank you.
Okay, this was the last question of the conference call. Just to say thank you for your participation, especially today, that we know that is a very busy day for you, for all our analysts with many companies presenting at the same time. So just to recall that IR team will be available in case you have any other questions. Thank you and have a nice day.