Good afternoon and welcome to our full year 2018 results presentation, which will be presented by our CEO, José Bogas, and by our CFO, Luca Passa. In the following slide, we will elaborate on the progress of our strategic plan according to its key strategic pillars, and after, we will go through the full year operational and financial performance. Following the presentation, we will have the usual Q&A session open to those connected both on the call and on the web. Thank you for your attention, and now let me hand over to José Bogas.
Thank you, Mar. Good afternoon, ladies and gentlemen, and thank you for joining us today. As usual, let me start this presentation with the main highlights of the period. Overall, a very good set of results in 2018, exceeding our announced and improved guidance, which showed an outstanding 12% increase at Adjusted EBITDA level. The ongoing efficiency effort has resulted in an almost flat level of fixed costs, partially absorbing the effects of inflation and growth. At the bottom line, net ordinary income came in at EUR 1.5 billion, with a remarkable 4% increase once it has been netted from non-financial asset results and impairments, as we will explain later on. These results will allow us to propose to the next AGM a gross dividend per share of EUR 1.427, with a 3% increase compared to 2017 gross dividend.
Moving now to the delivery of the strategic plan, I'm starting from the financial target achieved on slide number three. EBITDA amounted to EUR 3.6 billion ahead of the 3.5 improved target last November and the original EUR 3.4 billion communicated in the previous business plan, mainly thanks to better market conditions in the liberalized business, coupled with the stability of the regulated businesses. Reported net income was EUR 1,417 million, while net ordinary income came in at EUR 1,511 million, increased by 4% year- on- year and ahead of the EUR 1.4 billion targeted. This reference is calculated by deducting from the consolidated net income the net result from non-financial asset sales and the net result from impairments, both figures higher than EUR 10 million, which is considered to be material.
This positive result has allowed us to increase the gross dividend per share proposal up to EUR 1.427 per share, based on a 100% net ordinary income payout ratio. This dividend is above both our minimum dividend per share and last year's dividend per share, a 3% increase year- on- year. Net CapEx rose by 39% compared with 2017, in line with guidance, underpinning the start of a new growth path. Finally, free cash flow reached EUR 0.9 billion, a 31% decrease versus 2017, mainly due to the higher CapEx and aligned to the proportional free cash flow committed on in our business plan. To sum up, we had a very solid performance last year, accomplishing and partially exceeding the target that we had set.
On slide number four, net CapEx has experienced sound growth of around 40%, from EUR 0.9 billion to EUR 1.3 billion, out of which around EUR 350 million had been devoted to digital transformation in all business lines. Asset development CapEx has doubled last year's figure, in accordance with our renewables growth plan, where EUR 250 million were invested last year. Network automation took the lion's share of the 41 CapEx allocated to distribution in order to implement our quality plans and prepare our network for the energy transition. Before looking more deeply into the financial performance of the year 2018, I would like to review the progress made so far on our strategic plan on slide number five. I will start with our first pillar, centered on our commitment to decarbonize our generation mix while ensuring security of supply.
Regarding installed capacity, we had an 8% increase in renewables thanks to the Gestinver acquisition, which added 132 MW of wind farms to our mix. Moreover, we expect that 899 MW of new wind and solar capacity awarded in 2017 auctions to be on stream by the end of this year, where we are well on track. Going forward, we are developing a pipeline to support the additional capacity of 1 GW committed to in the 2019 to 2021 plan and securing attractive financing, having signed the first green loan with EIB for over EUR 300 million. Regarding power generation, Endesa's total output decreased 6% as a consequence of the reduction of the thermal gap in the period and of the nuclear output, affected mainly by Vandellós outage.
This output reduction occurred despite our hydro production increasing by 67% to 8.3 TWh, well above a normal year and slightly ahead of our business plan estimates. Also, renewable output rose by 11%, supported by good wind conditions. Our zero-emitting technologies accounted for around 50% of total output, with a 5% reduction of CO2 specific emissions compared with 2017, well on track to meet our decarbonization target. Let me now move to the second strategic pillar, smart networks, on slide number six. Operational performance indicators remain stable in a context of higher activity and extreme weather conditions throughout the year. Efforts on network digitalization are contributing to better grid reliability and quality of service, driving efficiencies with a reduction of 4% in unitary OpEx.
With these objectives, more than EUR 500 million were invested, around 9% more than the previous year, highlighting that in 2018 we fully deployed our smart meters program, 11.8 million devices. And finally, visibility has improved for an efficient and predictable remuneration, which is key to enhance smart network deployment in the energy transition. Moving to slide number seven and going through our third strategic pillar related to customer value, electricity sales in the liberalized business decreased in Spain and Portugal by 7% in terms of volume as a consequence of the new commercial strategy launched in 2017, aimed at a value-based management of our customer base, targeting and retaining high-value customers in an increasingly competitive market context, as well as the closure of some chemical plants.
To this end, overall customers were stable, but free customers increased by 2% as a result of our effort in capturing new B2B free customers through marketing campaigns. The unitary integrated margin has shown a solid evolution, increasing 27% to EUR 25.7/ MWh and exceeding our business plan expectations. It has mainly benefited from a higher unitary revenue, while unitary costs remained stable thanks to the higher hydro load factor offsetting higher commodity prices. The current level of supply margin above EUR 8 /MWh in the liberalized market was better than the previous year and slightly higher than guidance, thanks to a different mix of customers with a higher weight of high-margin clients, on whom we have focused our value management strategy. Moreover, as of today, we have already hit around 82% of our 2019 estimated output at an average all-in price of EUR 74 /MWh .
As far as the year 2020 is concerned, we have hit around 40% of our estimated output, corresponding mainly to hydro, nuclear, and renewable production. Taking into account our total sale mix, we expect an all-in price of around EUR 73 /MWh . In the next slide, number eight, regarding the gas business, the recovery of market fundamentals resulted in a significant improvement of the margin. Total sales had slightly increased by 2%, mainly due to the wholesale activity supported by global LNG demand recovery and higher retail sales, +4%. To the contrary, the lower CCGTs output led to lower gas sales by 24% in this segment. At the bottom of the slide, you will see that the number of customers increased by 3%, consolidating levels of 1.6 million.
Our ordinary unitary margin climbed to EUR 1.9 /MWh thanks to a noticeable improvement of gas market conditions that resulted in greater competitiveness of our contract, as well as to the recovery of gas prices references. Moving to slide number nine, the strategy followed in the retail business had positive effects on the business indicators, with a remarkable improvement in churn rate, not only in electricity but also and specifically in gas, which exceeded expectations set out in our business plan. This is a result of having redesigned our internal processes and customer interface, which are continuously being adapted to be fully digitalized on a new platform, and the effort to develop new and more sophisticated products adapted to the customer needs.
The digitalization effort in the retail area, which includes over 50 projects, has led to a very relevant increase in the main digitalization KPIs, which will also reflect the change in pull versus push channels. The number of contracts with e-billing rose by 33% in 2018 to 2.8 million customers. The proportion of digital interaction climbed from 68% in 2017 to 81% in 2018. The number of digital contracts expanded by 19%, standing at 4.4 million and reaching the target for 2021. All the above allowed a reduction of the cost to serve around 1%, down to EUR 13.7 per customer, paving the way for additional savings in the upcoming years. Moving to Endesa X on slide number 10, Endesa X's core activity lies on four main areas based on customer typologies: e-home, e-industries, e-city, and e-mobility.
In 2018, Endesa X was working to adapt its internal capabilities to the challenging environment through a new flexible organization and renewed commercial structure that will allow us to increase capillarity. Nevertheless, the division has managed to improve margins year- on- year. e-home and e-industries businesses, being the core business of the Endesa X, have been able to consolidate and improve value proposition and relationship with our customers, providing above 95% of the Endesa X growth margin. Focusing on e-mobility, I would like to highlight several initiatives aimed at becoming leaders in electric mobility through the development of innovative solutions. Progress on our objective of 41,000 charging points by 2021. Endesa X is reaching important agreements with corporations to deploy our charging infrastructure. This is the case with Saba, with whom we have agreed to install 400 charging points in their car parks.
More opportunities for Endesa X will arise after the recently published Plan Nacional de Energía y Clima, where incentives in business related to electric mobility and energy efficiency are expected to facilitate the way through energy transition. Now, moving on to the fourth strategic pillar, operational efficiency in slide number 11, our efficiency program affects all our business lines, reflecting a sound evolution since 2015. Our OpEx evolution is almost flat year- on- year, with efficiencies partially offsetting inflation, perimeter, and growth, which was heavily restarted in 2018 with higher CapEx, as commented on before. In generation, the continuous operational improvement in all the technologies using the most advanced optimization tools and leveraging on digitalization allowed us to further reduce our generation unitary cost by 6%.
Likewise, regarding Enel Green Power España, several cost synergies initiatives allowed us to reduce its fixed cost versus 2017 by 2%, outperforming our guidance for 2018. In distribution, digitalization efforts and the increase in the resilience of our asset allow us to reduce operational costs with unitary cost per client down by 19% in 2018 versus 2015 and by 4% versus 2017. Lastly, in supply, we have trimmed the cost to serve by 1%, leveraging on the digitalization initiative already mentioned. Moving on to how the execution of our strategy affects our KPIs of sustainability, these results are part of Endesa's sustainable business approach, as well as we are determined to focus our business on a vision of creating shared value. Our sustainability plan has four strategic lines. In relation to the commitment to communities, a large number of people have benefited from our programs.
In climate change, specific CO2 emissions in 2018 amounted to 418 gr of CO2 per kilowatt-hour, a 5% reduction versus 2017, on a clear path to total decarbonization by 2050. When it comes to investment in infrastructure and digitalization, we have deployed all of the smart meter plan, reaching 11.8 million devices, invested almost EUR 350 million in the digitalization, and installed 164 public charging points. Finally, regarding our employees, we continue to implement a wide range of measures to promote talent attraction and retention, diversity, work-life balance, and continuous training. These sustainable results allow us to face the future with the confidence of being in the best conditions to continue creating value for our shareholders and for the society in which we operate. Now I will hand over to Luca Passa, who will present the details of our financial figures.
Thank you, Pepe. Good afternoon, ladies and gentlemen.
We are now on slide 14, where the main financial figures of the period, as mentioned, EBITDA and Net ordinary income increased by 2% and 4% respectively. The main drivers behind these evolutions are: the Liberalized business has performed above expectations as a result of the full recovery of extraordinary market circumstances experienced last year. It has been positively driven by the favorable evolution of renewables and better fundamentals of the gas market. The Regulated business remained stable compared to the previous year. As mentioned before, a huge investment effort has been carried out, mainly in renewables and in digital transformation, translating into a 39% increase of net CapEx, which affected the reduction of Free cash flow in a similar proportion.
Finally, net debt increased by 16% over 2018 to EUR 5.8 billion, mainly driven by higher CapEx, extraordinary acquisition of Gestinver and Ceuta, and the full dividend of 2017 results paid in January and July this year, totaling EUR 1,463 million. Let's now analyze the EBITDA evolution on slide 15. Endesa has reached EUR 3,627 million of reported EBITDA, +2% versus last year. Once net of the one-off items in both periods, fully detailed in the slide, Adjusted EBITDA has grown by 12%, an increase which has been driven by the good performance of both the liberalized and distribution businesses. Adjusted generation and supply EBITDA rose by 40% to EUR 1,212 million, with a remarkable contribution from renewables. It must be noted that Enel Green Power España EBITDA of EUR 212 million, which includes the consolidation of Gestinver.
Distribution EBITDA, in adjusted terms, increased by 4% to EUR 2,059 million, recording the effects of higher regulatory revenues and lower OpEx. Non-mainland generation EBITDA reached EUR 356 million below last year, once deducted one-off, due to the lower revenue related to lower capacity, O&M, and fuel cost. These good results have exceeded the updated estimates of EUR 3.5 million commented at our last quarterly presentation in November, confirming the resilience of our business and making us comfortable with the targets set in our 2019-2021 business plan. When it comes to the regulated business, and now on slide 16, the Adjusted EBITDA improved 2% up to EUR 2,450 million, as distribution margin increased EUR 70 million, thanks to resettlements, higher incentives, and revenue from the subsidiaries. On the contrary, the non-mainland generation gross margin was EUR 31 million lower in adjusted terms due to the lower regulated revenues.
Adjusted fixed costs remain barely flat year- on- year. Overall, the regulated business contributed to Endesa's total Adjusted EBITDA with 67%. Regarding net CapEx, asset development represents 56% of total CapEx in the regulated business, as a consequence of the digital transformation in which our network is involved. Moving now to slide 17 for the liberalized business, Adjusted EBITDA reached EUR 1,212 million, or a 40% boost year -on -year compared to the adjusted 2017 figure, driven by a sound EUR 423 million increase of gross margin. In power, the recovery of 2017 adverse market conditions has led to a significant increase in the integrated margin, supported by the generation margin, backed by higher renewable, hydro output, and Energy and Power contribution, improvement of selling prices, and the balance strategy following the management of the short position this year, that has shown a positive delta of around EUR 100 million.
In gas, the improvement of market fundamentals has driven a remarkable increase of EUR 82 million in the recurring gross margin, up to EUR 138 million. The main drivers have been the higher selling price and the increased competitiveness of our sourcing portfolio. Endesa X increased by 13% its gross margin compared with last year, being e-home and e-industries the main margin contributors, as Pepe just said. On net CapEx, the development of renewable projects awarded in 2017 auction absorbs around EUR 200 million to ensure that they are ready to operate before the end of 2019. Fixed costs increased around EUR 77 million, mainly due to the provision for redundancy plans and voluntary departure agreements, updates of provision relating to workforce restructuring plans and voluntary departure agreements, and litigation proceedings. Moving now to slide 18, on the P&L evolution from EBITDA to net ordinary income.
Starting from the EUR 3,627 million of EBITDA, D&A increased by 13% to EUR 1,708 million. This is mainly due to the booking of an impairment of EUR 158 million in Alcúdia, in non-mainland, resulting from the shutdown request of groups one and two and the reduction of useful life of group three and four. Additionally, the implementation of IFRS 15 triggers an increase of EUR 54 million in this item in 2018, while 2017 D&A benefited from a reversal of impairment losses of EUR 40 million. Without these effects, D&A would have decreased of around 2%. Net financial results increased mainly due to the following factors: higher average gross debt, despite the reduction in the cost of debt, 1.9% versus 2.1% in 2017. The financial income in 2017 in relation to the social bonus. The update of financial provision derived from workforce restructuring plans and facility dismantling, together with the adoption by IFRS nine.
Stripping out these last effects and either minor adjustments, net financial results would have decreased less than 1%. The associates and others items reflect the absence of the EUR 48 million negative provision booked in 2017 in Nuclenor. Income tax expenses amount to EUR 392 million, negatively affected by the impact of EUR 25 million resulting from a fiscal inspection, with an effective tax rate of 21.6%. Stripping out this effect, the effective tax rate of the period would have been 20.2%, almost 2% below 2017, as a result of higher deduction. As a result, net ordinary income increased by 4% in the period. Moving now to slide 19 on cash flow evolution from EBITDA to free cash flow.
Cash flow from operating activities stands in line with last year, reaching EUR 2,420 million as a consequence of the following effects: higher EBITDA after provision of around EUR 100 million, working capital and others increased by 29% to EUR 522 million, mainly due to the increase in the negative trade balance and higher inventories, partially offset by higher cash in of non-mainland compensation. Income tax decreased 7% due to the higher deduction, as commented before. Net financial expenses paid increased mainly due to the higher average gross debt, despite the reduction in the cost of debt, and the financial income cash in in 2017 in relation to the social bonus. Free cash flow reduced by 31% in the period, up to EUR 909 million, mainly due to the increase on cash-based CapEx by 34% as a consequence of the development of renewable capacity and the digital transformation in which we are investing.
Moving to slide 20 on the evolution of net financial debt, net debt amounts to EUR 5,770 million, EUR 785 million higher than the previous year due to free cash flow that was EUR 909 million positive, as explained in the previous slide, the cash out and debt consolidation of the acquisition of Gestinver, as well as the cash out of the acquisition of Ceuta, all included in the change in perimeter and others item, and the payment of EUR 1,472 million in dividends, mainly corresponding to the full payment of the dividend against 2017 results. The result of the above-mentioned effects led to a net debt at the end of the period of EUR 5.8 billion, with a leverage ratio of 1.6x . The regulatory working capital has increased by EUR 280 million, up to EUR 810 million due to the different number of regulatory settlements booked in both periods.
Note that this amount does not include yet the return of the due amounts corresponding to 2015 non-mainland definitive settlement for over EUR 300 million. Gross debt has an average lifespan of 5.3 years and an average cost of 1.9% at historical lows, which implies a significant reduction versus the 2.1% reported at the end of 2017. Financial liquidity amounts to EUR 3,040 million, out of which EUR 244 million in cash and EUR 2,796 million available in credit lines. Moving now to slide 21, I hand over to Pepe for some final remarks.
Thank you, Luca. As we have already shown throughout this presentation, once again in 2018, we succeeded in exceeding the target announced to the market. This good set of results led us to be confident that Endesa has established the base to execute our business plan. Moving to shareholder remuneration on slide 22, total shareholder returns in 2018 amounted to a sound 20.9%, considering both effects of share appreciation and dividend return. Against 2018 results and in accordance with our 100 payout on ordinary net income policy, the Board of Directors proposed, subject to General Shareholders' Meeting approval, a total gross dividend per share payment of EUR 1.427 per share on 2019 results. This dividend represents a 3.3% increase when compared to last year.
Finally, I would like to conclude by highlighting some of the aspects of our performance: our continuous and timely delivery of the financial target committed to in the strategic plans, our execution related to key strategic pillars and enablers, together with our commitment to the energy transmission initiatives, and finally, our 2018 performance paves the way to assure our reaching the 2019 financial target. Ladies and gentlemen, this concludes our full year 2018 results presentation. Thank you very much for your attention, and we are ready to take some questions.
Okay, thank you, Pepe. Now we are open to answer all the questions you may have.
If you wish to ask a question, press star one on your keypad. Please be informed that in order to assure audio quality, we recommend that all questions are asked from landlines. As a reminder, that's star one to ask a question.
The first question comes from Alberto Gandolfi from Goldman Sachs. Please, Alberto, go ahead.
Thank you for taking my questions. Good evening, everyone. I have three, two of which are very quick. The first one is, you were showing that retail margins were up more than EUR 1 /MWh in 2018 versus 2017, and you talked about returning to normal levels. So should we assume a similar level for 2019, given what you have seen so far in the year? The second question is a little bit maybe very detailed and probably a bit boring, but on slide 19, on the cash flow statement, you have nearly EUR 800 million of negative cash flow from provisions paid, working capital, and other. And I was wondering if maybe for 2019 and 2020, if you could give us an idea of what a normalized level for those figures might be.
And I appreciate particularly working capital can be very volatile, but if you can maybe help us navigate through the cash conversion on the EBITDA. And the last question is a little bit more convoluted, and I was thinking mostly on there's no big changes in your targets for 2019 and 2020 versus how markets have developed. Yet, if I'm not mistaken, you're still looking at a pretty hefty increase in 2021 EBITDA, right? You plan to go from about 3.8 to about 4 billion. And I was wondering, with power prices that have come down, I mean, you were talking about already 2020 hedging here to be something like EUR 73/ MWh all in so far, a euro below, but you might well be down another probably EUR 3 or so in 2021, maybe even more than that, depending on what happens with the taxes.
And at the same time, you have a little bit of renewable additions, retail probably quite stable, but renewable additions mean higher D&A. You have talked about a 1.9% financial expenses has been probably trough. So my point is, how can we see growth in 2021 versus 2020 when power prices are a headwind, D&A should be higher, financial expenses could be higher? You are adding a bit of renewables, I take that, but the other three factors seem to go against you. So could you maybe elaborate a bit on that? Seems an important year given that your payout ratio is going to change. Thank you.
Thank you, Alberto. I will try to answer the first one, and then Luca will answer the second and the third one. In terms of the retail margin, as we have said, we have reached something above EUR 8 /MWh in the year 2000, last year, 2018. We think that, and we are confident, just to maintain this margin of EUR 8, slightly above this EUR 8 /MWh in the future. And that is based just because we have changed our strategy, as we have commented on before, in the sense to look for value clients. That means that we will try to retain and to attract new customers that will improve the mix with higher margin. So we feel confident just to maintain this margin in the future.
Thank you, Pepe. On the cash flow on slide 19, Alberto, I mean, as far as the evolution in 2019, you should assume cash flow from operation improving by about EUR 150 million, and this is mainly driven by some reduction in provision, but really minor reduction in provision, but the improvement is in the working capital. In the working capital, we are affected this year, as mentioned, by the increase in regulatory working capital, as mentioned. The assumption that we have in the plan for regulatory working capital going forward is a normalized level between, I would say, EUR 600 million and EUR 700 million, so a reduction improvement is there, plus, obviously, as you remember, this year we have been affected by increasing price throughout the year, which affected also the working capital throughout the year.
So you will see an improvement in working capital driven by regulatory working capital and, I would say, normal course of business. As far as the third question, i.e., how do we improve in 2021? I mean, first of all, 2021 is completely unhedged at the moment. So assuming our assumption in terms of power price is there, you have a huge improvement in the liberalized business. As you remember, we have also in the liberalized business an improvement in the gas margin in the third year of about EUR 50 million, which we commented previously. Plus, obviously, you will have all the renewables additions that come online in the last year. So you will have 900 MW this year, 500 MW in 2021, and an additional 500 MW in 2021. Obviously, assuming the price that we have in our assumptions that drives the increase in liberalized business.
This is the main driver of, I would say, the gap between 2020 and 2021.
Thank you, Alberto. Next question comes from Meike Becker from Bernstein.
Thank you very much for taking my questions. I have two. The first one is on the new energy plan that has been published for Spain. What does that mean for your coal closures specifically, and the investments you were planning to make? Has that changed? What does it mean for your renewables targets? Can you be more aggressive on your renewables targets? Are you more positive? And my second question is on the updated 2019 expectations. You have not increased your EBITDA or net income guidance, yet the numbers you present today for 2018 are considerably better. We are already ahead of EUR 3.6 billion on an EBITDA level and on normalized level, EUR 1.5 billion net income. So how confident are you that 2019 numbers are actually going to be ahead of your plan? Thank you.
Thank you for your question. First of all, well, we feel comfortable with the new energy plan, as you have said, with the goals of this plan. I should say that Endesa is aligned with the objective and with the full plan. You should notice that this is an indicative plan. It's the roadmap that we should follow just to get this target in the year 2030. In terms of coal closure, let me say, if you look at one of the tables in this report, you could see that in the year 2030, the government is expecting to have zero or 1.3 GW of coal in operation, probably, I'm sure, with a very low load factor, not only just because of the emissions, of course, because of the emissions, but just because of the competitiveness of this power plant.
But in any case, in relation with the gradually phase-out of the different current capacity that we have today, what we think is that we should monitor the evolution of this plan, and we will have the opportunity to really take the decision based on the plan that we have today, but taking into account the reality in the future. In relation with the renewable target, we have not changed our objective. We will see again the evolution, and we have not changed our target because you remember we said that our aim would be just to capture something between 10% and 15% of the total new renewables. That means taking into account that it would be a 65 GW increase and taking into account that around 10 comes from the 2017 options. That means that we will achieve more or less five to six.
And if you remember, we said that we were thinking about around 8 GW more in the year 2030. So we will see what happens in the future, but we feel comfortable, and we will not change our target in the renewables capacity.
As far as your second question regarding our guidance for 2019, obviously, this is confirmed with our 2018 numbers. Although 2018 numbers are better than expected, let's say we feel comfortable with our 2019 guidance as of now as it is, i.e., basically EUR 3.7 billion of EBITDA and EUR 1.5 billion of net income. Bear in mind that the increase in EBITDA between 2018 and 2019 will be driven by, again, the liberalized business. We will have a slightly better integrated margin throughout the year, and obviously, an improvement into the gas business in terms of gross margin of the gas business. We will have to absorb a slight increase in terms of cost because, obviously, we are growing much more this year than the previous years. As far as net income, I mean, bear in mind that we will have an additional EUR 100 million of EBITDA.
We still have, let's say, higher D&A throughout the year for about EUR 50 million, and we're talking about normalized D&A, i.e., taking out the impairment for 2018 of EUR 158 million we were discussing before and slightly higher taxes. So that drives, let's say, basically to our guidance of 1.5 also net income level.
Next question comes from Harry Wyburd from Bank of America Merrill Lynch. Please, Harry, go ahead.
Good evening, everyone. Two from me, please. So just firstly on the non-mainland impairments and the year-on-year earnings change this year, could you just give us a bit more color as to what's happened there? Why the regulatory revenues have gone down? What triggered those impairments? And could you give us a rough EBITDA outlook for non-mainland for 2019? And then the second one's on gas. Can you remind us when you're expecting your first deliveries on your Cheniere contract? And are you worried that there's been a very significant decline in gas prices, obviously in Europe, but also in Asia, which could potentially jeopardize the margins on that contract? Thank you.
Okay, Harry, I will try to answer the second one based on gas. First of all, we are expecting the first delivery of the second ship of Cheniere in the second half of this year, 2019. In terms of our strategy in relation with the context of the gas, I would like to say that we feel comfortable. You know that this gas business is a very volatile business, but it is true that the context has changed a lot. That means that with Brent prices around $65 per barrel, we are in the threshold of the competitiveness of this LNG coming from the United States. So, and for sure, with very much competitive compared with other new possible contract based on traditional Brent-linked gas. So we feel comfortable with that.
As you know, we are expecting something around in terms of margin of EUR 0.2 billion in the year 2019. I agree with you that it would depend just to be a little bit higher or behind this figure. It could depend in the Asia behavior, but in our business plan, we don't have any deviation forecasted. So that means that this kind of business will increase or improve our estimation for the year 2019.
As far as the first question, I mean, what triggered the impairment in mainland? Basically, there was a ministerial order in October this year, which basically implied non-remuneration for Group One and Two of Alcúdia, which we asked for basically closing at the end of last year. And so we had to basically write off all those two groups. Plus, we basically the assumption is to shorten the useful life of Group Three and Four from 2035 to 2027, again, based on this ministerial order. The impact in D&A of this has been EUR 158 million and net income level EUR 190 million. Going forward for 2019, the expectation as far as gross margin EBITDA for non-mainland is very similar to this year.
Thank you. We have now Enrico Bartoli from MainFirst.
Hi, good evening. Thanks for taking my question. First question is related to the distribution business. First of all, if you can share us when you expect CNMC to take the decision regarding the remuneration for next year for the distribution, if you think that the 5.5% indicated last year could be a good reference. And considering that the energy plan is forecasting huge investments in electricity grids in order to allow the energy transition, if you think that that kind of remuneration could be consistent in order to force the companies to invest massively in the electricity networks. A second question is always related to the energy plan. If you can comment on the target for the phase-out of nuclear plants by 2035, what is your position on this?
If you can share us your view on the investments that would be needed in order to keep the plants open till the date, and if you think that the current level of electricity prices with the current taxation, the return on those investments can be reasonable. The last one is back on the gas business. You're expecting an improvement in the profitability in 2019. Can you please give a hint on the driver of the further improvement in the margins that you expect this year? Thank you.
Enrico, I will try to answer the first two questions, but in any case, I will ask Luca to help me after my answers. First of all, when you talk about the CNMC decision regarding the remuneration of distribution, I would say that, first of all, there is no improvement in the remuneration rate just because after the Royal Decree published recently transferring the responsibility to the CNMC, the CNMC is allowed just to go ahead with this. So in that terms, we really think that just before the end of the year, they will publish, if not soon, they will publish this 3.6 remuneration rate. I agree with you, this huge amount of investment needed just to go ahead with the energy transition plan. The figure that the government has established in the plan is close to the one that we were thinking about.
What I could say now is that with 5.6 today, we feel comfortable just to go ahead with the investment. What is going to happen in the future? Well, it is absolutely clear. If the work increase and the remuneration rate doesn't increase, we will have a problem. A problem, I say, the system. That means the regulator and the utilities, the distributors. But always we have resolved this kind of problem in a reasonable and fair way. So I think that today the remuneration rate is a good one. And if nothing changed, it will continue being a good one. In the future, if it needed just to adjust this, for sure it could be adjusted. Talking about nuclear and investment, well, first of all, I would say that, well, no one is thinking that the nuclear fleet should be shut down in the year 2025.
We are thinking, at least what we have read in the plan, is for one unit in the year 2030 and the rest three units in the year 2035. First of all, again, I would like to underline that this is a plan, an indicative plan, let's say that. As I have mentioned before, this plan is indicative and should be indicative because nobody knows what could happen in some years in front of us. It's a very good thing to have a plan just to try to get these emissions, renewables, efficiency targets that we have.
But it is clear that our first target is just to go ahead with the gradual incorporation of renewables in the generation mix and to monitor how the reserve margin evolves, how things go on, how the innovation and new technologies in terms of performance and competitiveness will evolve, etc., just to take the final decision. So in that sense, we feel comfortable with the plan and we think that, well, it is an indication, it's indicative, and nothing more. In terms of the investment needed, Luca?
Yeah, Enrico, in terms of investments, I mean, we ran about EUR 140 million CapEx in nuclear on a yearly basis, more or less. And those CapEx already account for investment for extending life, let's say, towards the 50 years of useful life, which means out of this EUR 140 million, about between 50 and 60 are what we call extension CapEx. So it's already accounting in our plan as far as, let's say, extending the life of these plants. And regarding the third question, i.e., evolution of gas margin in 2019, let me remind you, first of all, 2018 has been a very good year with the recovery. We have a gross margin for the full 2018 year of EUR 140 million approximately. As you remember, we started with EUR 50 million at the beginning of the year.
We're forecasting for 2019 an increase to shy of EUR 200 million as far as gross margin in gas. And this comes from basically an increase in margins that basically grows from 1.9 to 2.9 in the year, so from 2018 to 2019, which is driven mainly by better sourcing and by lower retail sales, so lower volumes of 5 TWh . So these are the two main drivers for our improvements in terms of gas margin in 2019.
Now we have Anna Maria Scaglia from Morgan Stanley.
Hi, just a couple of quick questions from me. The first one is regarding the tax rate because it remains very high, very low, sorry. So I was wondering if you can comment on that, how sustainable you see such a low tax rate. And the second question is regarding the nuclear again and the plan. I heard what you said and the fact that this is just a plan, therefore things can change in the future. This does mean that despite the plan saying basically that nuclear should close between 2025- 2035, you're not planning to revise your plan. Can you please confirm? Thank you.
Maria, on your first question on tax rate, actually we're forecasting a higher tax rate in the plan. Just to give you some references, we are forecasting a 23% in 2019 against a 21.6% which we reached in 2018, and 22% in 2020, and 21% in 2021. So basically remaining around this level between, I would say, 21% and 23% across the plan. Is it low? I mean, obviously, we will try to be the most efficient possible there, but obviously, new requirements are coming every day in this area. As far as the nuclear life extension, obviously, this will depend on the extension request that we'll put forward every time. What I can give you in terms of scenario, in terms of increasing D&A, is the current plan foresee from the national energy plan is an average useful life for the whole fleet of 46 years.
With this average useful life regarding our impact, it will mean an increase of between, I would say, EUR 50 and EUR 60 million in terms of yearly D&A. And this will be obviously the worst-case scenario. Obviously, again, we will basically revise our D&A policy every time we will ask for an extension. And there will be extension asked both in 2019 and 2020.
Now we will answer some questions received by email, starting with Antonella Bianchessi from Citi. She's wondering if we could repeat the forward sales volume and prices for 2019 and 2020. And the second question coming again from Antonella is that in the light of declining generation output, Endesa expect to reduce the market share in electricity sales? And if we are comfortable with the remaining materially lumpy customer position, or we could change the strategy?
Trying to answer Antonella, the second question, I should say that always we have said that we, Endesa, we are in a very strong position, at least in my opinion, and the reason is because I prefer to have or to be long in customers. To be short in customer is very easy and takes you a minute just to reduce, to increase the customer base, take you a lot of time to do it. So today we feel comfortable, and as we have said, we are trying to change and we have launched in the second half of the year 2017, and we are working on it, a new strategy looking to avoid, let's say, the traditional price war in the supply business and looking for different things.
When I say different things, on the one hand, looking for more valued customers in the sector, trying to give a little bit more than a pure commodity to our customers, both B2C and B2B. So trying to summarize, I would say that we will try to maintain, it's not an objective for us just to maintain the market share, but we will try to maintain the market share if we are able to maintain the value of our customer base. And it is easy just to deal with a long supply customer than a balanced one or a short one.
Regarding your first question, Antonella, in 2019, we averaged 82% of our estimated output at an average all-in price of EUR 74 /MWh . As far as 2020, we averaged around 40% of our estimated output, which is corresponding mainly to hydro, nuclear, and renewable production. Taking into account our total sales mix, we expect all-in price of around EUR 73/ MWh in 2020.
Jorge Guimarães from Haitong is asking if we are considering to bid in the auction of low-voltage concession in Portugal.
Yes, we are still waiting for the rules, but we are interested, of course, to do it. When we will see the conditions, we will decide if it's to go ahead or not. But in principle, we continue to be interested.
Next question comes from Roberto Letizia from Equita. He's wondering if the impact of the three IFRS is included in the guidance for the next year.
Yes, Roberto, they're included. There is a detail of each impact in the annex in the slides at both EBITDA, D&A, and at income level. So you will have all the numbers basically to model through.
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The last question comes from Praxis. He's wondering if Endesa has an opportunity to invest in PV solar in Spain, which should be the return on equity expected.
Let me say, of course, it's an opportunity. We will go ahead with, as you know, we have said that beyond the 2017 auctions, we are expecting to have one gigawatt more in the year 2020-2021. Also, we have said that we would like just to increase our renewable fleet in the year 2030 with, let's say, 10%-15% more share of the new capacity that will be developed up to the year 2030.
Yes, for the 2017 auction, return for PV solar is actually in the range of low double digit, and we're talking about equity level IRR. For the 2020-2021 developments, we are targeting around 9.5% of equity level IRR for solar. Obviously, this is an average of all the projects that we have. There are projects with a higher load factor and projects with a lower load factor. So it's an average. And bear in mind that in the one gigawatt that we're going to develop in 2020 and 2021, 700 MW is going to be solar. So the majority of our developments beyond 2019 will be solar.
Okay, thank you, Luca. At this moment, we have tackled all the questions received so far. So thank you very much for your attention and just remind you that the IR team will be available for any question you may have. Thank you very much.