Good morning, ladies and gentlemen. Welcome to the first half 2023 results presentation, which will be hosted by our CEO, José Bogas, and the CFO, Marco Palermo. Following the presentation, we will have the usual Q&A session open to those connected on the call and on the web. Thank you. Now let me hand over to José Bogas.
Thank you, Mar. Good morning, everybody. Let's start with the highlight of the period. During this second quarter, we have seen a gradual softening of the macro scenario in Europe, with inflation showing some signs of moderation, despite which some rate hikes are still not ruled out. Energy market had been characterized by falling gas prices that have resulted in a big relief in power prices, easing the need of further regulatory measures. In this context, we have recorded a strong operating and financial performance that give us good visibility to meet 2023 target. EBITDA, like for like, increased 27%, reaching EUR 2.5 billion, while net ordinary income is up by 20%.
FFO is robust and accounts for EUR 1.6 billion, with a remarkable improvement, thanks to the normalization of the negative market context that impacted working capital evolution last year. On slide number 4, you can see the evolution of the main operational parameters across all businesses. Mainland renewables capacity amounted to around 9.3 GW, an increase of 0.8 GW over the last 12 months, with an emission-free output of 81% that allows us to cover around 76% of our fixed-price contract, reducing our sourcing costs, risk exposure, and improving profitability. Customer in the liberalized market increased, reaching a total of 6.9 million, consolidating our leadership backed by an appealing commercial offering in a scenario of still high and volatile prices.
As proof of our commitment to boost electrification as one of our main strategic pillars, we continue to accelerate charging point deployments, reaching 16,600, an increase of 50% in the last 12 months. In grids, we continue to improve quality indexes. Time of interruption improved to 25 minutes, while RAB remains stable at around EUR 11.4 billion. Deep diving into investment deployment on slide 5. Overall, gross CapEx amounted to more than EUR 1 billion, 12% higher than previous year. Around 80% of total investment have been channeled towards the strategic pillar outlined in our business plan. On the one hand, to develop new renewable capacity, and on the other, to optimize network operation through the improvement in efficiency, the adaptation of the network to new customer needs, and enhancing, at the same time, service quality and resilience.
On slide number six, we summarize the evolution of the market dynamic throughout the period. During the second quarter, European gas references continued with a downward trend already seen in the past quarters. Behind this performance lies the combined effect of milder temperatures, weak industrial activity, and the ongoing gas-saving measures endorsed by the European Union. TTF and PVB spot reference prices were, on average, 55% down year-on-year. Cumulated mainland demand fell by 4.8%, heavily affected by the combined effect of the reduction of the interconnection balance, the increase in self-consumption, that boom in 2022, and last but not least, the economic downturn affecting industry and SMEs.
This as mainland demand performed better and decreased by 3.8%, with services and residential segment trimming its demand by 5.3% and 4% respectively, due to the aforementioned effects. The relative normalization of commodity prices, the destruction of demand, and the record levels of renewable output have resulted in a 57% fall in average spot power prices in Iberia. On slide number seven, sales to liberalized customer with our free power market amounted to 36 TWh, with index sales decreasing by 2%. Fixed-price sales were almost 80%, backed by our CO2-free generation, ensuring the competitiveness of our customer energy costs and further reinforcing the commercial appeal of our integrated business strategy. Solid development of free power margin, with grids EUR 58 per MWh, almost double the previous year level, mainly resulted from.
the outstanding thermal margin is still benefiting from the favorable market environment. The higher price driven output margin due to better achievement prices, supply margin normalization now returning to levels around EUR 12 per megawatt hour, and finally, the positive result obtained in the management of our short position. Regarding forward sales, we continue a steadily progress in hedging energy sales to fixed price customer for the coming years. A brief focus on the gas business. We are on slide number 8. Total gas sales decreased by 5%, mainly due to lower CCGT activity and a slight decrease in gas sales compared to the previous year. This trend is in line with the demand contraction at country level, normalizing from the extraordinary levels reached in 2022.
Total gas unitary margin slightly decreased year-over-year, reaching EUR 0.8 per megawatt hour, showing that the favorable market scenario seen in first quarter is normalizing. Volume hedge of our sourcing contract come to 90% and 65% for 2023 and 2024 respectively. Now, I will hand over to Marco, who will detail the financial results.
Thank you, Pepe, good morning, everybody. Sorry. The soundness of our business model is clearly reflected in the strength of our financial performance, as detailed on slide 10. EBITDA is to the EUR 2.5 billion, marking a solid 27% growth year-on-year in comparable terms, while net ordinary income came in around EUR 900 million, 20% higher. Both figures show a normalization compared to the extraordinary results of the first quarter. FFO strongly improved by EUR 1.8 billion, mainly due to the no- normalization of working capital, strongly impacted by the market context in 2022, as we will see later on. Moving now to the main drivers of the EBITDA growth, I am on chart number 11.
The integrated business management, that you can see in the spotted box, in gray color, represents the bulk of this growth, with EUR 867 million increase, a notable 95% versus previous year. All of this was driven by a positive performance in supply, normalizing the margin from negative levels of the first half of 2022, as well as in conventional generation and renewable businesses. Distribution EBITDA slightly increased by 3% to EUR 902 million. Lastly, the 1.2% extraordinary levy impact in Q1, as well as the positive effect of the social bonus sentence that we booked in the first half of 2022, are posted in the structure line of the PNL in gray color on the chart.
Moving into a deeper analysis, we are now on slide 12 on generation and supply business. EBITDA reached around EUR 1.8 billion, doubling result of previous year, with an increase of the free power margin by EUR 937 million, as Pepe has just commented. Additionally, a slight deterioration in the gas business. If you look at the other margin, it remains almost flat, with lower contribution of the non-mainland business, mainly affected by previous year resettlements and the recognition of higher fuel reference last year, mainly offset by the positive net impact of gas mark-to-market. Finally, fixed cost slightly increased, mainly explained by the inflationary context and higher activity.
We move to slide 13, distribution EBITDA increased by 3%, as we said, to EUR 902 million, explained by the positive delta of gross margin due to the negative previous year's resettlements that we booked in the first half of 2022, and a slight fixed cost increase as a result of some positive, non-recurrent booked last year and some CPI impact. Let's now continue with the analysis of the results below EBITDA. I'm on chart number 14. Net ordinary income amounted to EUR 879 million, up 20% compared to previous year, on the back of the positive dynamics commented at EBITDA level. D&A increased by EUR 83 million year-on-year, mainly due to the higher investment in renewable, distribution, and retail, and a slight increase in bad debt.
Financial results increased by around EUR 220 million, mainly explained by higher financial expenses as a result of the increase in average gross debt, coupled with a worsening interest rate scenario affecting the cost of debt, and a negative delta from the financial provisions update. Rise in income taxes by EUR 51 million. Sorry, mostly driven by the non-deductible revenue levy. Lastly, minorities decreased by EUR 26 million. Moving to the cash flow on slide 15, FFO recorded a sound improvement versus last year, reaching EUR 1.6 billion in absolute terms. Deep diving into the main dynamics that positively affected the working capital, there was a significant improvement of half a billion EUR in the regulatory working capital in the second quarter, mostly thanks to settlements cashed in related to the non-mainland system.
Positive impact as well of the net trade payables and receivables as a consequence of variation in energy and commodity prices, recovering from the abnormal market context in 2022. This was something that somehow we have highlighted in the previous quarter. All of the above was partially offset by higher income taxes paid, mainly from the increased result in 2022, and the payment of higher net financial expenses due to the increase in interest rates. Further improvement of FFO is expected over the rest of the year. If we now move on the debt evolution on chart 16, net debt stood at EUR 10.6 billion, decreasing by 3% versus the full year of 2022. It should be underlined that the positive FFO, already mentioned, was more than enough to cover this period's investments.
Gross debt decreased by 22% due to a sharp collateral requirement reduction of 53%. As a consequence of the recent rising progression in interest rates, the cost of our debt reached 3%. Our financial management reveals strong credit metrics in the period. Leverage, measured as net debt on EBITDA ratio, slightly decreased to 1.8x, well below the industry average, and FFO to net debt ratio stood at 33%, increasing by 18 percentage point versus last year. Let me now hand over to Pepe for the final conclusions.
Okay. Thank you, Marco. Now, some closing remarks before the Q&A. First of all, in this semester, we have once again delivered a solid set of operating and financial numbers, thanks to the integrated vision of our business model. This strong performance translated into a solid improvement in FFO, which has contributed in consolidating our solid financial position. All in all, these results, in line with our expectation and the high degree of visibility on business development from the rest of the year, supports our confidence in achieving the 2023 target. This concludes our first half 2023 result presentation, I think we can now open the Q&A session.
Okay, many thanks, Pepe, Marco. We are now open to answer all the questions you may have.
The telephone Q&A session starts now. If you wish to ask a question, please press star 5 on your telephone keypad. If you change your mind, please press star 5 again on your telephone keypad. Please ensure your phone is not muted.
First question comes from Manuel Palomo from Exane BNP Paribas. Please, Manuel, go ahead.
Hello, Mar and everyone. Good morning, and thanks for taking my questions. I've got. Let's say, let's take just two to three questions. First of all, I'd like to get your views on recent PNIEC draft drafted by Spanish government and sent to the European Union. Related to that, also, whether you could, well, share your views on future renewable investments in Spain, whether you could rethink them given the low power prices that we are seeing, specifically in hours in which the sun is shining. Secondly, I remember that back in November 2022, ENEL announced a EUR 21 billion divestment plan, which included a gas portfolio in Spain.
I wanted to have an update on it, please, and also whether the potential divestment of that gas portfolio could represent any upside on the dividend for the year 2023. Finally, I wanted to ask, I know that Endesa is a pretty efficient company. However, I wanted to ask whether you feel like there's additional room for cost-cutting in the company, in order to try to help the group to achieve future years guidance. Thank you very much.
Okay. Thank you. Thank you, Manuel. Let me start with the first question that you have posted in relation with the PNIEC update. First of all, I would like to say that this draft document will be not draft, but something real, in June 2024. It is open to changes. Even more, we are sending allegations up to the 5th of September to the government. Having said that, this new draft PNIEC, increase ambitions in terms of renewables, and it is even more challenging than the objectives set out in the REPowerEU. In that sense, the first thing that I should say is that we see it as positive.
Having said that, positive, we see, from a initial reading of the document, that the plan seem very challenging, and, we noted some uncertainties, or if you prefer, weak points. First of all, the sector capacity to increase 85 GW of wind and solar versus the year 2022. That means, something around 10 GW per year until reaching 133 GW in the year 2030. Why I said this, sector capacity? Well, in my opinion, it's not realistic to deliver this quantity, taking into account the history, the statistic that we have. More deeply, I would say that there are technical difficulties on integrating all the new capacity in such a short period of time.
The second thing is the scarcity of key components and specialized labor force. I would add the increasing social opposition, and finally, the financing difficulties. At the end of the day, what I think is that the market will really fix the renewables that will be introduced in the system. The second thing is the sector capacity to increase 12 gigawatt of pumping and batteries up to 18, if I'm right, gigawatt in the year 2030. Also, the sector capacity to develop 11 gigawatt of electrolyzers. That seems a little bit difficult, in my opinion. This 11 of electrolyzers will or would cover the total hydrogen gray hydrogen that we consume in Spain today.
In addition, the feasibility of increasing the interconnection with France from the current 3 GW to 8 GW, this is pending subject during many time. Finally, we are a little bit worried about the security of supply after the phase-out of Almaraz, the first two reactor of Almaraz in the years 2027 to 2028. All in all, as I have said, it's a positive thing because it's ambitious, challenging, I think that we will have time to discuss with the government to try to adjust this plan.
With regard to the gas portfolio, let me say that, and I will ask Marco just to go deeper in this question, we continue with our idea of selling a part of our business. It is true that the context has changed a lot. When we decided to do that, we are thinking about prices around EUR 100 per MWh in a little bit lower than that in the gas market, and now we are looking prices in the last month of June a little bit higher than EUR 30 per MWh. Nevertheless, we continue examining the possibilities, and within that, we will have some kind of news at the end of the year.
In the third question that Marco will answer also, if there is room for more cost-cutting? Absolutely, yes. Always there are room for cost-cutting, I think that one of our strength is that during the last years, we have been working just to reinforce our balance sheet and our and strength, our competitiveness. This is the real, in my opinion, strength of this company: to be prepared for the future, to be prepared for being solid in our numbers, to go ahead and to be one of the leaders of this energy transition. Marco, could you please?
Thank you, Pepe, and thank you, Manuel. Thank you, Manuel, for being here together with us, and thank you to all the others that are following us. We know that for you that follow the sector, this is a horrible day, 15 results presentation. Thank you very much for staying with us. Manuel, on renewable investments, I mean, actually, the renewable investments are some of the keys that somehow guarantees us increasing positive results, because, of course, we lower the cost of our production. That's something good for us, given that we have this short position, and we have this fixed sale to our customers. This is something positive.
Having said that, I mean, you know, we will, we are now elaborating the new business plan that we will present on November, and there is the, probably the right place just to discuss all of this and to discuss the volatility that we are experiencing right now. I'm sure that there will be some impact in the new business plan of what we are seeing right now. Coming to the gas portfolio sale, I mean, you know, we are open to discuss. As you know very well, that we have been, you know, having open dialogue with some interested parties on this.
I guess that here on the perimeter of those discussion are basically limited only up to part of our portfolio, as you perfectly know, and this is probably around. The discussions are around the 2 BCM of our 6 BCMs, so in particular, the 2 BCM coming from U.S. I mean, it all depends, I guess, from, as Pepe was commenting, from the scenario that we'll see. Now, it's not particularly exciting, but we see potentially, you know, the market changing maybe in the last quarter of the year. I mean, let's see. The channel remains open, let's see. On cost-cutting, I mean, you know, the CEO told you.
There is probably not so much to add, apart from the fact that, of course, we've been reducing cost along the years. Now, you know, the cost-cutting is more related to simplification that we have to commit, so it's a bit more difficult than the easy one of the cutting at the beginning. We are now actually trying to simplify things and change things, working on cost-cutting, particularly, maybe not so much related to 2023, but particularly looking at 2024. This is something that we will then detail more in the next presentation, and we will have the chance to discuss. Thank you.
Many thanks, Manuel. Next question comes from Alberto Gandolfi from Goldman Sachs.
Mar, thank you, and good morning. Thank you for taking my questions. I'll have two. The first one is a little bit, maybe more elaborated, but it's on earnings. I see that, you know, it's late July, you're reiterating the full year guidance. You have delivered more than 60% of the midpoint of net income you're supposed to do for the year. You know, considering that Q3 usually is very similar to Q2, we might be able to pencil in, you know, maybe another close to EUR 300 million net income. That means that Q4 is gonna be probably very important. I was wondering if you can tell us what a normalized Q4 on hydro spreads trading might look like for you?
If you don't reply to the question, I was wondering, why not revisiting guidance already? Is there anything that worries you in the second half that we're not thinking about? Because it looks like if just conventional generation and trading stays like in Q2, and you just look at the rest of the business, it'll be pretty difficult not to be where consensus is at the very least, which is EUR 1.6 billion. Anything, maybe in the development of the unregulated profits, we should be... or margins, we should be thinking about. The second question is, can you tell us, please, what's your expectation in terms of renewable additions in Spain over the next, say, 2.5 years? If we put ourselves in December 2025, how much capacity do you actually think is going to come?
What is that going to do, in your opinion, to spot prices? It's probably gonna change a bit, the seasonality of hourly pricing. Do you think that you're gonna be able to make money, given your long position and given some of your merchants, portfolio combination? Thank you so much.
Okay, Gandolfi, thank you for the question. I will try, yes, to answer the second one. Marco will answer the first one. With regard to the capacity able to be put into operation in the next years, well, let me say that as I have said, there are we are facing some problems. When I say we, I am talking about the sector. The technical difficulties of integrating this new capacity are related to the scarcity of key components and specialized labor force. There are an increasing social opposition. We are doing our best trying to convince the local citizens about this new generation and the benefit that we will obtain, all of us, in this.
Many other things, in that sense, let me say that during the last year, the record has been something between 5 and 7 gigawatt per year. If we take into account that, we are thinking about 10-15 gigawatt in the next 2 years only. I think that it's gonna be very, very difficult just to really put in operation more than this total amount that I have said. One thing is what we want or what we wish to do, and we agreed that the target should be challenging. On the other hand, we should be realistic.
Having said that, the second thing is how prices in the European Union and also in Spain are going to be in the future with this increase in renewables. I would like to say that the important thing for me is not the reduction of the prices in the wholesale prices. It's the volatility that these new renewables, especially the solar, are going to introduce in the system with an excess production, let me say, in the central hours of the day, while I think in the rest of the hours will remain being expensive as marginal prices are set by gas.
Not only by gas, but on top of that, the manageable hydro, and also the interconnection with France. Considering this volatility, our long-term models point to prices in 2030 at level of EUR 75-80 per megawatt hour. Assuming gas price at EUR 25-30, that means euros per megawatt hour, that means lower than the ones that we have in the future for the next year, 2024, something around EUR 40-45. Taking into account a CO2 at something around EUR 100 per tonne, which is higher than the 80-90 that we have today. This is something that we think it will increase in the future because it's the policy of the European Union.
We see a reduction in the price of the gas, but we don't see this reduction. Even more, we see an increase in this CO2. If we take into account the total amount of renewables that we have in the PNIEC plan, this price that I have said, between 75 and 80, would be something around EUR 60 per megawatt hour. So in my opinion, at least up to the year 2030, we are not going to face in the context and with the assumption that we have, we are not going to face a low electricity price. But we will see a huge volatility during this period. In that sense, let me say that the renewable producer with...
doesn't have a PPA or doesn't have customer to sell this electricity in what sense, not hedged through these kind of elements, will face problems. That is not the situation that we see for integrated, vertically integrated companies. Now, Marco.
Thank you, Pepe, good morning, Alberto. Coming to the first question, basically, you know the house very well. You know that historically, we give guidelines, you know, we stick to that. Sometimes we deliver more than that. Yes, that's true. Nonetheless, we do not uplift guidelines because, you know, we know that there are, you know, volatility out there, we tend to wait for things to happen. Going to the numbers, I mean, you're right. It's, you know, if you look at the earnings, we are more than 60% on the results. If you look at the EBITDA, just to make it simple, if you look at the EBITDA, you know, we did 2.5 in the first half.
How did we build the second half? In the second half, what we did is forgetting, you know, the second half of 2022, because it was a special year. We went back to the other, you know, other years, 2020, 2021. If you look historically, we tend to have a contribution of EBITDA in the second semester that is around EUR 2.1 billion-EUR 2.2 billion. If you add this to the EUR 2.5 that we have done till now, you come to the EUR 4.6-EUR 4.7, that is basically the upper end of our guidelines. Is it there something that, you know, scares us in the future?
Not particularly, apart from the fact that recognizing that there is volatility, and we are still only at half of the year. I mean, you know, we want to follow and continue to work there, and then see what will happen in the next quarter, in the next quarters. Thank you.
Okay, next question comes from Jose Ruiz from Barclays. Please, Jose, go ahead.
Yeah, good morning, thanks for taking my questions. I just have two. The first one is, if you can update on discussions about the non-mainland, so the islands' receivables, and this EUR 200 million reduction in receivables, if it's attributed to settlement of payments. Second question, I was surprised a little bit by the low production of combined cycles in the second quarter of the year. Production went down by 21%. Considering the thermal gap that was big, I was wondering why you reduced production of combined cycles. Thank you.
The I will try to, Jose, to answer the second one. You have said that considering the thermal gap, why we have reduced the production of the combined cycles? Well, first of all, you should take into account the decrease in demand, the increase in renewables, et cetera. At the end of the day, the thermal gap has been reduced, if I'm right, something around 8 TWh this first half versus the first half of the previous year. In that sense, it is normal, this reduction in the combined cycle production.
We really, let me add to this, that the extraordinary situation that we have during the previous year, especially in the second half of the previous year, is not replicable in this year, 2023, in our opinion. We have had a very good performance during the first quarter, due to the inertia of the context that we've seen in the last quarter, in the second half of the previous year. We don't expect this situation in the rest of the year.
Thank you, Jose, and thank you also for seeing somehow some sparkle on the working capital. Thank you for seeing that. Actually, for us, on the regulatory working capital, we are finally seeing some light at the end of the tunnel. As you remember, we started the year with EUR 2.3 billion of actually of credit vis-à-vis the institution to be recovered. Unfortunately, the situation got even worse at the end of the first quarter. This number went to up EUR 300 million to EUR 2.6 billion. Now, finally, we are seeing some light, we have been capable of inverting this trend. Now we are down to EUR 2.1 billion.
We know that this is still a huge number, we recognize that, but at least we had, you know, a turning of the trend. We are working hard till the end of the year just to significantly reduce this number. Thank you.
Thank you. Next question comes from Jorge Guimaraes, from JB Capital.
Good morning. Thank you for taking my questions. I have three. The first is, can you elaborate on the evolution of gas margins in second quarter? Because I believe it was negative, so I would like to understand better the reason why. The second is related to guidance. It's a bit of a follow-up to Alberto's question. Because taking your high end of guidance, the EUR 4.6-EUR 4.7 EBITDA, and then analyzing the lines below EBITDA, I reach EUR 1.6, EUR 1.7. You continue to guide to EUR 1.4, EUR 1.5. I would like to understand here the difference. Finally, it's a bit of a detailed question, but one of your competitors in Spain was talking about curtailments impacting the production of renewables.
I would like to understand if you feel the same thing, and if that can impact the production of the pumping hydro, in your opinion. Thank you very much.
Sorry. Thank you, Jorge, for your question, and I will give the word to Marco. He has to answer the first one and the second one, the guidance one, once again. Talking about your third question, in the sense if we see some kind of curtailment in the renewable production, yes, we see this curtailment. Also, let me point out that in the PNIEC plan, in the draft PNIEC plan, this it's something around 25 terawatt-hour per year in, and circumstances of increase in demand, increase on the interconnection with France, increase in electrolyzers, et cetera. That is something that we will see in the future and that we are seeing...
we start to see, now, and will increase, in the future, for sure.
Thank you, Pepe, and thank you, Jorge. Going to the first question on gas. Well, on gas, what we have seen is that actually, there has been a retail and wholesale market that has been pretty much depressed in terms of scenario. We had the chances just to put in value the sales that were somehow canceled by our clients in the first quarter, but this didn't happen in the second quarter because the scenario was particularly depressed. What we see in the near future is that probably the third quarter will continue to be not particularly attractive, while we do see probably a rebound in the final quarter.
I mean, you know, probably the first and the last quarter will be positive, and this quarter and the next quarter, maybe not so positive. In terms of guidelines on earnings, thank you for the question again. You know, let me give you the real... If you look, if you went back to the chart, page 14, the big the big number there on the chart, that is basically is related to financial results and others. It's EUR 260 million in terms of financial costs. When you open this number, there are approximately EUR 200 million, that is the cost of financing, basically, and EUR 60 million related to provisions.
Now, for the time being, we are still sticking for the end of the period, to a number that is, you know, basically doubling this 260. Basically in the 500. I mean, this somehow explains why, I mean, there is we're still somehow conservative and still confirming the guidelines at 1.4, 1.5. Having said that, I mean, this all depends, apart from this, you know, this consideration on financial results. I mean, again, this all depends on the top line, on the EBITDA. As I expressed before, I mean, we are sticking to what we have seen in the previous quarters of unaffected, as non-extraordinary years, like the 2020 and 2021. We stick there.
I mean, let's see what happens in the near future, and eventually we will reconsider. Thank you very much, Jorge.
Okay, we move to the next analyst, that is, Jorge Alonso from Société Générale .
Hi, good morning to everyone. I have a couple of questions as well, please. I would like if you can provide some color about the generation in the Q2 versus the Q1, so moving parts, to understand a little bit what's going on there. Once again, this is related about how to understand how the second half can evolve. The other one is, if you have a view about the hydro output expected for this year, and if that materially differs from the expectations that you have at the end of the first quarter.
Related to this, if there is a possibility that part of that output was already hedged, you can see some negatives coming from covering that production, which was already expected and sold. The final one is if the hedges you have already done for 2024, if you think that those ones are completely safe, even if the new government could decide to extend the clawbacks. In the sense that if a clawback is extended, probably, I mean, the margins should be once again regulated by the CNMC. Already the sales has been done.
If those ones you think could be absolutely safe, depending, independently of, from the, any decision from the new government. Thank you very much.
Okay. Thank you, Jorge. Let me give a very brief answer, and then Marco will answer. The different in the generation in the second quarter versus the third quarter is the thermal margin that we have obtained. As I have said, we benefited from the inertia of the last year, in the first quarter, that this doesn't happen in the second quarter. With regard to hydro expectation, it's something around 4 TWh, a little bit higher than the last year, but very low. We don't have any problem because we never hedged this part of the hydro production that depends on the average of the production of the year.
We take into account the drought year, then we don't expect any surprise in this. With regard to the hedging and the clawback for the year 2024, well, we think that we are safe in the sense, if the new government eliminate this clawback, we will maintain more or less the same results that we have forecasted with the clawback. Marco?
Good morning, Jorge. Thank you very much for your questions. In terms of generational results, I mean, probably it could be useful, if you look at the page seven and our free power unitary margin. I mean, we're indicating 58 for the first half of 2023. The number that we had in mind at the beginning of the year was something around 48. Now, after we concluded this first half and we look to the second half, we do see this 48, like, probably being kind of conservative, and what we are seeing is a number that is above 50 EUR per MWh. I mean, we do expect the second part of the year somehow, you know, in line, maybe slightly lower than this number.
On hydro, I mean, you know, our forecast for the year is still a production of 4 TWh. This means that basically is exactly what we have sold, so there is no amount of production or no increase of production that has been sold and maybe not be there, so that there is no particular risk related to that one. Of course, there could be eventually an opportunity if we are able to produce a bit more than the 4 TWh at the end. In terms of hedges, I mean, just to remind you what we said when we presented our business plan, you know, last year, basically, we were somehow including in 2024 the clawback.
Then when it came to 2025, even though the scenario was very positive, we were not, you know, we were not regulating our margin on that scenario, but we were assuming a more conservative scenario somehow. Coming to your question, I mean, you know, we somehow maybe, you know, included the clawback in 2024, and if any extension to 2025, this should be not so, not so shocking to us. Thank you.
We have now Fernando Lafuente from Alantra. Please, Fernando, go ahead.
Hello, everyone. Good morning. Just three questions. One of them is a follow-up on Marco's last answer on the clawback. If I understand you correctly, all these sales that you've done already, all the hedgings, have considered this EUR 67 cap on electricity, you know? My question is gonna be the other way around. If the clawback cannot be maintained because Europe says that it's not possible to maintain it, do you have any room for kind of increasing the prices of this electricity? And obviously, I understand that all the part that you have not hedged, you would be free to sell it at the price that you consider, right? The second question, it's on net debt.
As you were saying, working capital is going better than expected. I would like to have an update on the 2023 guidance of net debt, Marco. Do you think it could be lower than the one that you guided for in Q1? The third question, maybe you will answer it in November, in the strategic plan, but wanted to have your view on the balance between renewals and dividends, no? Considering that, as I understand from your answers, you are kind of considering a slowdown or a delay in your investments in renewals considering the current environment. Could it be translated into an increase in the dividend? It would be in the payout or just in the floor. What are your views on that side? Thank you so much.
Okay. Thank you, Fernando. Let me say, with regard to the clawback and the 67 EUR per MWh, we have sold this electricity to our customers at these 67 EUR per MWh. In that sense, there is no room just to increase in the short term. It could be done in the medium term, but not in the short term. With regard to the third question, the slowdown in renewables and also to have more room for dividends or whatever, well, one of the main objective is the solidity of our financial performance. We are focusing in reduction the net debt, also the gross debt. We are trying to increase the FFO.
We are trying to be prepared for the future, for being a leader. I have said that, well, we are living now in a context in which the inflationary context in terms of labor and materials have given us an scenario in which some companies are thinking just to reduce the volume of megawatts, maintaining the same amount of CapEx, just to really take into account the financial performance. We always look about the financial performance. We have been very conservative always.
As Marco has said, the net debt, EBITDA is something around 1.8 now, and we will continue looking that and taking into account these solid financial indicators to continue in the future, maintaining it. We will do, that is our first objective.
Yes. Thanks, Fernando, and thanks, Pepe. As Pepe was commenting, actually, Fernando, let's do not forget how we started the year. We started the year with a gross debt close to EUR 19 billion. Now, what it is true is that we are going down faster than we thought. We are at EUR 14.5 billion in terms of gross debt, and the reduction, so the reduction on collateral has been stronger than we thought. Then I would say also the cash generation, it's very solid. In terms of guideline, in terms of net debt, you were asking, you know, we gave to the market something between EUR 11 billion and EUR 12 billion at the end of the year.
If you ask us now, as you are doing, actually, we are probably seeing something more between EUR 10 billion and EUR 11 billion. Something in line with the net debt that we are currently seeing, including, of course, the regulatory working capital. I mean, the question that I see there that is related to CapEx and dividends, I guess that is a question that we probably have to pose ourself at the end of the year when we will present the new business plan and giving us time just to have all the financial, you know, clarity on our position. Thank you.
Okay, next question comes from Rob Pulleyn from Morgan Stanley.
Hi, good morning. Thank you. If I could just ask a question on the integrated margin, which follow us up from earlier. Clearly going very strong this year. Would you be able to give us a bit of a steer for how you think this should play out post 2023, i.e., what is the normalized level we should all be thinking of? That is the last question. Thank you.
I think for the question, Marco.
Yeah. Thank you, Rob, thank you for being together with us today. On integrated margin, as we somehow commented before, we do see, you know, we are seeing a stronger strong power component for the time being, for the first quarter. As I said before, you know, on free power margin, we do see, you know, a better contribution when compared to what we were expecting in 2023. Basically, more than EUR 50 per megawatt hour of margin. Basically, you know, the power margin being strong also in the second part of the year.
We, I repeat, for the time being, we still stick to our to our guidelines. Thank you.
Okay, thank you, Rob. This was the last question of our call. Just remind you that, as always, our team, will be available in case you have some, further questions. Thank you all for participating, especially in this busy day. Just, to say have a nice day, and enjoy your summer break.