Good evening, ladies and gentlemen, and a warm welcome to the 9M 2020 results presentation, which will be hosted, as always, by our CEO, José Gálvez, and the CFO, Luca Passa. Following the presentation, we will have the usual Q&A session. As we have done during the last quarterly results presentations, we ask those connected to the call or webcast to send questions only via email at ir@endesa.es. Additionally, we kindly ask you to limit your questions.
Additionally, we kindly ask you to limit your questions to the financial and operational performance of the company during the period, and to wait until next 25th of November for the update of our strategic plan. Thank you for your attention, and now let me hand over to José Gálvez.
Thank you, Mar, and good evening to everybody. Thank you for being able to join us today in these unprecedented and troubled times we are living. It is my heartfelt desire that you and your families are safe and in good health. Let's start with the main highlight of the period. In 9M 2020, we have continued to deliver solid financial results despite the extremely complex environment. EBITDA increased by 8% compared to last year, 3% on a like-for-like basis, excluding the non-recurring impact booked during the period as a consequence of the new collective agreement application and the new personnel provision that we will detail later on. Our liberalized business has shown sound performance, proving again its resiliency against the COVID-19 backdrop.
On the 31st of July, Endesa reached an agreement with the unions to apply a new voluntary individual early retirement program that will involve up to 577 people related to the restructuring of the activities resulting from the change in energy generation mix. This is a further step forward towards greater flexibility that will allow us to meet future challenges by providing new efficiencies. At the bottom line, net ordinary income base for the dividend payment increased by 38%, further proof of the sound foundation of our company. Endesa, as part of its commitment to society during the COVID health crisis, designed an action plan called Public Responsibility Plan, endowed with EUR 25 million with actions directed to our clients and to all citizens. In October, we launched the second phase of this plan aimed at mitigating the COVID-19 consequences.
Moving now to slide number four, I would like to comment on the market context for the period. During third quarter, power demand minus 3% continued to recover progressively as expected compared to the month of lockdown in the second quarter, where demand fell 13%. In the first nine months of 2020, Mainland demand is estimated at 176 terawatt-hour, falling 6.1% versus 2019, quite consistent with our full-year estimate. In a similar way, in Endesa's concession area, gross demand has softened the fall to 5.2% and to 6% in adjusted terms, with demand variation of minus 3.1% and minus 1.8% in adjusted and not adjusted ter, respectively. This development is mainly driven by the drop in the industry and service segment for the above-mentioned reason, partially offset by the slight increase in the residential sector activity.
For 2020, we're expecting a decrease in B2B demand of around 8%-10% to be partially compensated by demand rise in B2C customers by 4%-5%. We will monitor the COVID-19 evolution during the fourth quarter of 2020 and the economic impact of the containment measures for the second wave. Consumption evolution in 2021 will also depend on the size of the recovery of the fourth quarter of this year. As far as prices are concerned, the progressive improvement in demand and commodity prices during the third quarter brought a recovery of pool prices despite the strong hydro output of the period and the nuclear recovery relative to the second quarter. All in all, Spanish wholesale price averaged €31.9 per megawatt-hour in 9M 2020, still showing a decrease of 36% versus the same period in 2019.
On slide number five, we can see the increase in renewables capacity, which now represents around 44% of total mainland figure, well on track to reach the 60% target set out in our business plan once imported coal plants are phased out by 2021. Around 0.8 gigawatts of new renewable capacity has partially compensated the thermal output loss while contributing in reaching a record renewable output of 9.9 terawatt-hours, or 3.1 terawatt-hour increase versus 9M 2019. Emission-free production represents around 85% of total mainland production, already reaching the target set for 2022. The drop in Spanish demand has led to a 10% decrease in total gross sales, affecting mainly B2B -14%, strongly hit by the economy deceleration due to the COVID-19. As a result, B2B clusters suffer heavily, with industrial sales decreasing by 12%, while SMEs shrank by 27%, -27%.
The total power customer figure is slightly decreased by 1% due to the increased competitive intensity in the sector. These customer loss, together with the abnormally milder temperatures during last winter, explain the small decrease in the B2C segment. Coping with these competitive pressures, we have developed a number of initiatives aimed at maintaining our market share and the leading position in this business. As an example, Endesa has recently launched the Única offer to B2C customers, consisting on a flat rate that provides the security of a single fixed monthly fee regardless of the energy, electricity, and/or gas consumed, a tariff that is the first ever of this kind in the supply sector, resembling similar offers in TMT, that is technology, media, and telecom sector, and is being well received by the clients.
Another milestone aimed at improving our business management and to adapt to the more demanding needs of our customers has been the recent Endesa X agreement with Athlon to launch OneElectrica, the first all-inclusive electric vehicle leasing plan on the market. Moving on to slide number six and returning again to one of our priority objectives, the transformation of our generation mix, we continue building our pipeline of renewable projects to support future deployment targets. Our gross pipeline stands at 25.7 gigawatts. Out of this pipeline, around 30% has TSO awarded connection points, with a significant weight of solar, around 65%. At last summer's Portugal photovoltaic tender, Endesa was awarded with 99 megawatts, which will also include at least an additional 20 megawatt storage backup capacity, with a total expected Capex of EUR 90 million.
Among the several auction schemes, Endesa chose the bid under a merchant structure, in which we pay a fixed fee for a 15-year period in exchange for the lifetime property of the connection points and the battery service. We are confident that the achieved conditions will allow us to maximize return leveraging on our trading capabilities and our large client base in the country. Moving on to slide number seven, within our generation strategic pillar, the unitary integrated margin resulted in EUR 33.2 per megawatt-hour, showing a 19% increase year-on-year versus the EUR 27.9 per megawatt-hour of 9M 2019, while electricity sales in the liberalized business decreased in Spain and Portugal by 11% in terms of volume, that is minus 6.9 terawatt-hour.
This margin increase has been possible thanks to the positive management of the short position, which was partially offset by the comparatively worse evolution of the supply margin affected by the lower sales and the slightly lower generation margins. As we pointed out in previous occasions, full-year expectation at this stage points to a flattening of the margin in the coming quarter, with full-year aligned to our guidance in absolute term, while unitary margin is now expected to be around €32 per megawatt-hour as a consequence of lower sales volume driven by demand decrease. Regarding the forward sales, we have around 100% of our 2020 estimated price-driven output already hedged at an average all-in price of €74 per megawatt-hour. For 2021, we have hedged around 96% of our estimated price-driven output at an average all-in price of around 72.
Once we consider our total sales mix, the all-in revenue, including indexed energy, will convert to levels similar to 2020 reference. For 2022, we have hedged around 43% of our estimated price-driven output, mostly to our residential customers, with an estimated all-in price around EUR 71-EUR 72 per megawatt-hour. We expect to see a confirmation of the better trends seen in the market since the summer, more aligned to our expectation to keep on hedging the remaining levels. A few words on the gas business on slide number eight. Total sales have decreased by 12%, mainly as a consequence of the warm temperatures that affected domestic and international customers and the COVID starting in March that severely affected the industrial sector demand. To the contrary, wholesale sales kept on increasing, reaching a total figure of 7.7 terawatt-hour.
Total customers remain almost flat, increasing by 17,000 to the liberalized segment due to active client attraction campaigns. This has been achieved despite the strong competitive intensity registered this year. Endesa continues to explore new innovative solutions to increase its offer to customers. To this end, the Única offer to B2C customers includes a dual offer with a flat rate also for gas. Our unitary gas margin climbed to EUR 4 per megawatt-hour despite lower demand thanks to the better sales price reference versus procurement cost. We have continued to take advantage of the arbitrage among markets and of the flexibility of our contract, which has allowed us to benefit from purchasing cheaper gas in the spot market. Retail and wholesale margins have both increased versus last year, which was affected by a different market scenario characterized by much higher prices than the current ones.
As expected, the positive mark-to-market effect seen on the first half of 2020 has significantly reduced in these results, showing a cumulative positive of only EUR 11 million, and now I will hand over to Luca Passa.
Thank you, Pepe, and good evening, ladies and gentlemen. Let's now move to the financial performance of the period, and I'm now on slide number 10. The EBITDA stood at EUR 3,136 million, increasing 8% or 3% on a like-for-like basis once netted from non-recurrent effects that we will explain on the next slide. Net income rose by nine times to EUR 1,511 million, impacted by the impairment booked last year worth EUR 1.1 billion at net income level. Net ordinary income grew by 38% year-on-year, reaching EUR 1.7 billion. Funds from operation reached around EUR 2 billion, up 9% versus last year. Net debt increased to EUR 7.4 billion, around 16% versus full year 2019.
I will be back on this in a few slides. Now, moving to slide number 11. This is to illustrate the non-recurring impacts on personnel cost. As explained in the previous presentations, the collective agreement signed last January provides for a new and more flexible social benefit scheme as it establishes a modification of certain social benefits, mainly those corresponding to electricity subsidies for active and passive employees, more aligned to the average family consumption in Spain. From an accounting perspective, the new assumed commitment in the collective agreement resulted in a positive impact of EUR 515 million from the reversion of the cumulative provision for the employee benefits. Apart from this provision release, a new provision for workforce restructuring plans was booked in the first quarter for an amount of EUR 159 million.
Both items resulted in a net positive impact of € 356 million booked in the personal expense line, or € 267 million positive net impact. As already detailed in the concept of our decarbonization plan, a new agreement with unions representatives has led to the recording of a new personal provision for the voluntary departure of up to 577 employees for an amount of € 213 million. As it was the case with the coal impairments booked in 2019, this new provision has been recorded as extraordinary, as it is directly related to the change in the energy model adopted by the company. In this sense, its net effect is not included in the company's net ordinary income, therefore will not have an impact on Endesa 2020 dividend payment.
In summary, we expect to retire about 1,000 employees, or more than 10% of our workforce, providing the company with a greater degree of flexibility, allowing efficiency improvements to face future challenges. Before moving to the detailed analysis of the period, let's now take a look at COVID-19 estimated impact on our financial results, and I'm now on slide number 12. While the second quarter reflected a more negative impact due to the extension of lockdown during virtually the whole period, the third quarter showed a more moderate impact. The new normality of the summer period brought a certain stability to the economy, which translated in a recovery of the energy demand, commodity prices, and power prices. As of September end, we have estimated a net impact of around EUR 81 million at the EBITDA level, out of which around EUR 20 million in non-Mainland, mainly due to the sharp demand contraction.
Net of this effect, the EBITDA would have been up by 6% year-on-year. Moving down to the P&L, we recorded a negative impact on the EBITDA of € 23 million, mainly from the update of bad debt provisions in accordance with IFRS 9, which remains virtually unchanged since last quarter. At net income level, said impacts would translate to around € 78 million. Without considering these negative impacts, our like-for-like net ordinary income would have increased at 23% to € 1,511 million. CapEx will also be marginally affected by COVID backdrop, which is causing some delays in the pace of renewable deployment. Part of the delay will be recovered in the fourth quarter, leaving the rest for January-February 2021.
Despite its being very complex to foresee the future of COVID-19 impact due to the many uncertainties on the recovery path and time frame and the length of the outcome of this new partial confinement by regions driven by this new state of alarm, we do not expect additional material impacts from the remaining of 2020. All that makes us confident to reach our 2020 announced targets net of extraordinary provisions. Moving now to the data analysis of our like-for-like EBITDA on slide 13, let me now briefly set out the main drivers. As already commented, once deducted the non-recurrent effects booked in the personnel cost, Endesa EBITDA stood at EUR 2,993 million plus 3% versus 9M 2019. A sound performance despite the current headwinds that proves the resiliency of our integrated and sustainable business model.
Generation and supply EBITDA rose by 20% to EUR 1,390 million, mainly supported by the increase in the integrated electricity margin, the gas business, as well as the lower fixed costs. Distribution EBITDA decreased by 4% at EUR 1,471 million. Finally, non-Mainland generation EBITDA reached EUR 132 million, a 38% decrease year-on-year. I will comment each business performance on the next slides. So moving to slide number 14, focusing on our regulated business, like-for-like EBITDA decreased by 8% to EUR 1,603 million, with a lower gross margin while fixed costs dropped by 7%. Distribution margin decreased by 4%, mainly due to the application of the new remuneration parameters of the second regulatory period for 2020-2025. On the other end, at EBITDA level, it must be highlighted that the improvement of adjusted fixed costs by EUR 27 million.
The Non-Mainland generation gross margin decreased by € 93 million, mainly due to a negative fuel margin in the second quarter as a consequence of the fall in the international markets and lower O&M compensation. As expected, the rebound of commodity prices experienced since the summertime has allowed a more normalized quarter in the Non-Mainland generation business, providing an EBITDA in the third quarter 2020 of € 64 million, which favorably compares with the negative € 13 million recorded in the second quarter. Despite this improvement, 9M cumulated like-for-like EBITDA amounts to € 132 million, still 38% lower than last year. The approval of the ministerial order on fuel compensation last August the 7th has brought limited improvement to the remuneration formula, as some of our requests were not finally addressed.
As this ministerial order does not guarantee the full pass-through of the fuel cost, as should be the case in a regulated business, we will continue working with the regulator to introduce more rational references. Regarding our full year estimates, the sharper drop in demand cumulated in the year makes us be more cautious in our forecast. Our latest estimates point to a gap of around €50 million versus the €300 million EBITDA target announced last November. More details on this new target will be unveiled in the next Capital Markets Day on November 25th. On the liberalized business on slide number 15, EBITDA reached €1,390 million, or a sound 20% increase on a like-for-like basis, backed by €182 million improvement in gross margin, while fixed costs dropped by 5%. The main moving parts of the period have been the following.
The electricity integrated margin increase has been driven by the positive management of the short position, partially offset by the comparatively worse evolution of the supply margin affected by lower sales. The generation margin slightly decreased versus the previous year's levels, as the better generation mix supported by higher hydro and renewable output and the better procurement margin in CCGTs were mostly offset by the absence of the positive removal of the 7% generation tax adopted in the first quarter 2019, the reversal of the Catalan tax, and this year's increase in nuclear taxes, especially the increase in Enresa tax and the new Catalan tax effective since the 1st of July. Enel Green Power Spain gross margin reached EUR 216 million, above last year by 2%.
EBITDA dropped by 17% due to the increase in fixed costs explained by the new capacity and the hiring of new staff for new projects in 2020. In gas, gross margin reached around € 200 million, showing a remarkable 52% increase despite lower demand. The better sales price reference versus procurement cost and the flexibility provided by our contracts have made possible these remarkable results. Endesa X contributes with a gross margin of € 86 million. Moving now to the next slide, which is slide 16, on the P&L evolution from EBITDA to net ordinary income. Starting from the € 3,136 million reported EBITDA, D&A decreased by 9% to € 1,104 million, once excluded impairment on thermal assets carried out last year.
This decrease mainly refers to the lower EBITDA of generation assets included in the last year impairments, partially offset by the higher amortization in energy and power and the adjustment on nuclear fleet useful life set on the nuclear protocol. Bad debts increased by € 24 million, mainly affected by the COVID-19 scenario. Net financial results decreased to € 82 million, mainly driven by the impact of the update of financial workforce and dismantling provision, as rates fell by 0.8% in 2019, and the real rates decreased by 0.17% in 9M 2020. Other positive comes from the net exchange differences plus € 9 million as a result of the US dollars debt associated to the LNG charter contracts. Results from the equity investment and others improved by € 36 million, mainly thanks to the favorable court decision on Garoña nuclear tax.
Taxes increased by around € 113 million year-on-year, once excluded the positive fiscal impact of last year's impairment. This increase is mainly due to the net positive impact of the € 143 million booked in the personal expense line, which has an impact of € 36 million at income tax level. Effective tax rate stands at 23.7% versus 22.6% last year, mainly due to the lower modernization of tax relief and tax credits allocated to results and the allocation of deductible provision. Finally, net ordinary income increased by a remarkable 38% over the period. Now moving to cash flow on slide number 17, funds from operation increased by 9% year-on-year, reaching € 1,969 million due to the following effects: higher EBITDA after provision paid and net provision release with no cash impact of around € 135 million.
Working capital slightly improved by 3%, mainly due to the change in working capital thanks to the improvement of regulatory receivable, mostly from the non-Mainland compensation, partially offset by other non-cash provision and the effect of commodities valuation and derivatives. Income tax paid decreased by 7% to €164 million, mainly due to the higher corporate tax refund in 9M 2020. The cash-based Capex, 9% lower than the previous year, also led the free cash flow to positive €668 million in this period, increasing by €283 million, a remarkable plus 74%. Let's now look at the net debt on slide number 18. Net debt amounts to €7,407 million, €1 billion higher than the previous year. This increase is mainly due to the payment of €1.6 billion in income tax corresponding to the gross dividend against 2019 results. The regularatory working capital increased to €942 million.
Our credit metrics show a stable level of leverage, with net debt to EBITDA ratio at 1.8 times, slightly higher than in full year 2019. It's worthwhile to highlight, the extraordinary low cost of debt of 1.7% that remains a historical low record, placing Endesa as one of the best European utilities with the lowest cost of debt. As of 30 September 2020, sustainable financing represents 47% of Endesa's gross financial debt. In that sense, Endesa has recently signed its first sustainable factoring operation with Caixabank, which is linked to the fulfillment of sustainable objectives and reinforcing Endesa's commitment to the United Nations Sustainable Development Agenda for 2030. Going forward in our e-mobility plan, on 30 July, a EUR 35 million loan was arranged with the European Investment Bank to partially finance more than 8,500 recharging points in Spain.
Lastly, our latest guidance for full year 2020 net debt points to €7.1 billion, based on an assumption of €1.2 billion of regulatory working capital, assuming the cashing during the fourth quarter 2020 of some pending amounts in non-Mainland in accordance with the recently approved Royal Decree on Network Codes and the return of 2015 definitive settlement. And now let me hand over to Pepe for his final remarks. Okay, thank you, Luca. To close this presentation, I would like to conclude with some remarks on our performance during these 9M. First of all, in spite of the current context, Endesa has offered and continues to offer a sound underlying performance, providing visibility towards full year targets. The resilience of our integrated business model based on a stable regulated EBITDA, a consistent liberalized business, and long customer hedge, and a robust financial strength are allowing us to contain COVID impacts.
We are committed to a continuous effort to adapt the company to the challenges of the future and convinced that our strategy will enable us to capture all the growth opportunities arising from energy transition. Next November the 5th, the 25th, at our Capital Markets Day, we will disclose additional details on the main challenges in the near future and a perspective of what Endesa will look like by 2030. We believe that there is no better way to contribute to the economic recovery and to boost the very much needed job creation in the country than by means of accelerating the energy transition. To this end, we are working to accelerate our CapEx plan, leveraging sustainable financing and contributing to relevant and innovative projects, some of them potentially eligible under the European Union Recovery Fund mechanism. Ladies and gentlemen, this concludes our 9M 2020 results presentation.
Thank you very much for your attention, and we are ready to take some questions.
Thank you, Pepe. Thank you, Luca. Okay, we start now with the Q&A. So far, we have received questions from Alantra, Barclays, Bank of America, Credit Suisse, Fidelity, Mediobanca, Morgan Stanley, and Société Générale. Thanks to all of you. So I'll start with the first question on the coronavirus issue. This is for our CFO, Luca. How do you quantify the impact from COVID-19 during 9M? How much do you expect on full year in terms of EBITDA? Have you seen an increase in terms of bad debt?
Okay, thank you, Mar. As shown on slide number 12, the negatives booked in the first half of the year have not increased materially in the 9M results.
The second quarter was the most affected quarter, and the market conditions, such as energy demand, commodity reference, and supplies, progressively improved since the end of the first state of alarm in June. Endesa's integrated business model, while protecting from market volatility, allowed a solid underlying operating performance despite adverse scenarios. This resilience, together with the limited COVID exposure of the regular business, has led to a relatively limited and manageable impact so far. As of September 30th, we have estimated a cumulative impact of EUR 81 million at the EBITDA level, which is just EUR 1 million higher than what we have estimated in the first half, mainly due to the scenario of demand decline. Out of this amount, around EUR 20 million would correspond to the impact in non-Mainland generation business, hard hit by a sharp drop in demand during the tourist season in summertime.
In addition, we estimate an increase of EUR 23 million in bad debt provision in 9M, mainly due to the prospective IFRS 9 adjustment, which barely increased versus the EUR 20 million registered as of June. Total impact net income level has amounted to EUR 78 million. CapEx delays due to COVID have not been significant in 2020. Concerning our full year impact estimation, to date, it is not possible to make a precise estimate due to the uncertain future evolution of the macroeconomic, financial, and commercial variables and their impact on the recovery of the economy, as well as the government measures currently in force and those that could be adopted in the future. In this regard, last October 25th, the government declared a new state of alarm throughout the country to contain the spread of the disease.
It has an initial validity until November 9th, but there is a high probability of being extended, potentially up to six months. Despite this complex scenario, we remain confident that we will not have additional material impacts for the remaining part of 2020. Okay, next question is also for you, Luca. How much do you expect on full year in terms of net debt and working capital deterioration? Thank you, Mar. Regarding net debt, our last estimate at year-end amounts to € 7.1 billion, based on the assumption of € 1.2 billion regular working capital, including the return of about € 360 million corresponding to the definitive 2015 settlement in Non-Mainland generation business and the cashing during the fourth quarter of some of the pending amounts, also in Non-Mainland, corresponding to 2015 taxes in accordance with the recently approved Royal Decree on Network Codes.
The increase of about EUR 100 million compared to the EUR 7 billion estimate we had as of first half 2020 is related to a slightly worse capital estimate at year-end, given the negative evolution of the COVID-19 health crisis. We will continue to monitor these figures during the last month of the year, but as of now, we don't expect it to increase significantly. Pressure on working capital seems to be inevitable in this complex scenario, but Endesa's balance sheet is sufficiently strong to handle this temporary increase.
Thank you, Luca. The next question is for our CEO, Pepe. What's your view about electricity and gas demand in 2021, considering the second wave impact from the COVID-19?
Okay, thank you, Mar.
As we have explained during the presentation, in the first 9M of 2020, Mainland demand amounted to 176 terawatt-hours, falling 6.1% versus 2019, quite consistent with our full year estimate, -6%. The potential impact for energy and gas consumption in 2021 will depend on some factor of which we still don't have enough visibility. We are monitoring how the outbreak of COVID-19 will evolve during the fourth quarter of 2020 and the economic impact of the government measures aimed at limiting the spread of the second wave. As you know, we are currently working on our new business plan for the period 2020-2023 that will be presented to the market next November the 25th. What we can advance today is that we expect a gradual recovery in power demand from 2021, reflecting an increase in terms of GDP.
We are forecasting a GDP decrease of around 10% in 2020 and the recovery of part of the lost ground in 2021. The next question, Pepe, I think is also for you. In light of the tightening measures in Spain due to the spike in COVID cases, do you think there is enough buffer to still meet full year 2020 guidance? Can the target be exceeded? Okay, 9M results confirm our confidence to deliver our full year target for 2020, that is EUR 3.9 billion of EBITDA and EUR 1.7 billion of net ordinary income, that is net of the extraordinary effect we are booking this year thanks to the resilience of our integrated business model. Although so far we have had a manageable impact coming from the COVID-19 health crisis, we must remain cautious regarding potential further effects, as explained during the presentation. Thank you, Pepe.
We will go back to you, Luca, with some questions about provisions. Regarding 2020 dividend, which provisions have to be considered in the net ordinary income?
Thank you, Mar. Regarding your questions on dividend to date, the net provision affecting dividend amount to positive EUR 267 million or EUR 356 million gross. These results are from the positive impact of the EUR 515 million from the reversion of the cumulative provision of employee benefits as a consequence of the new collective agreement and the booking of a EUR 159 million provision for workforce restructuring booked in first quarter 2020. As far as the new provision of EUR 213 million booked on July 31st, it has been recorded as extraordinary as it corresponds to the initial net allocation of personal costs for staff restructuring plans relating to the decarbonization plan.
In this sense, its net effect will not be included in the company's Net Ordinary Income and therefore will not have an impact on Endesa's 2020 dividend payment. A follow-up question on the same topic. Do we need to expand more significant one-offs in Q4? Thank you, Mar. In general, our policy has been to adopt prudent criteria when making provisions. We must highlight that if the provisions are related to the transformation of the company through our energy decarbonization plan, they will be considered to have extraordinary nature and will not affect the dividend. Anyway, we keep on working on additional efficiency improvement plans to yield incremental ongoing cost savings, but it's difficult to anticipate if this will lead to more provisioning by year-end.
Thank you, Luca. What kind of ongoing cost savings can we expect from the two restructuring provisions booked this year?
Do you expect further efficiency measures?
Thank you, Mar. All in all, the two provisions booked so far in 2020 imply the yearly exit of about 1,000 workers, more than 10% of the employee base, with estimated yearly savings of around € 50 million by 2022. These savings will be completed with the reduction of travel expenses, lower corporate function costs, the lower quarter's lease negotiated during the summer, and the shift of supply system including billing. Current OpEx figures for 2020 are expected to stand well below € 2 billion, significantly dropping from the € 2.4 billion figure of 2014, and we expect it to decline further in the coming years. On the Recovery Fund, Pepe, has there been any update or feedback on the projects that Endesa proposed for the EU Recovery Fund? Okay, thank you, Mar.
The European Green Recovery Fund is an excellent opportunity to accelerate the energy transition process in Europe and specifically in Spain. Its targets are totally aligned with those of the Spanish government in terms of energy transition, and this could be the main catalyst for the economic recovery of the country after the COVID-19 crisis. For sure, we are well positioned to benefit from the European Union Recovery Plan and its translation to the plan for the recovery, transformation, and resilience of the Spanish economy, which unveils the main development channels through which the European funds will be mobilized. Our strategy and our plan perfectly fit with the focus that Spain and Europe have put on decarbonization and digitalization, among others, which put value on our SD plan.
We have already submitted to the government a list of around 110 projects consistent with the objective of these plans, able to receive post-COVID-19 recovery European funds. These projects represent around € 19 billion of total investment, of which € 16 billion are potentially eligible based on energy transition in the island, development of renewable gas transition, energy efficiency, hydrogen, sustainable transport, or development of smart networks. Although it is still very early, we have done our homework. Now, the deployment of these funds and the timing of the gas inflows will depend on the processes at European and country levels. Thank you, Pepe. The next question is for you, Luca, about the distribution investments. Is there any chance that the government could remove the cap on network investments or even maintain the increase in the cap for 2020-2022 to a longer period? Thank you, Mar.
To increase this limit is a continuous claim from all the utilities companies, as the development of the grid is unquestionably related to the expected growth in renewables needed to comply with the ambitious targets set by Spain in the National Energy Plan. We have always argued that the energy transition needs to be accelerated in advance, and this should be a priority as it will contribute to accelerate GDP growth by activating the economy. To undertake this process, large investments are necessary in distribution. In this sense, the investment cap must be lifted or even removed, adapting it to the new reality of the expected GDP and allowing that the necessary investment in digitalization can be carried out. Concerning the regulation, the limits can be modified in the event of unforeseen events or economic and technical causes.
Therefore, it cannot be ruled out that in view of the energy and economic crisis and to face the challenges of decarbonization of the economy, investment limits might be modified, especially considering the possibility of having European funds that could co-finance these investments. Moving now to more specific questions about renewables business, Pepe. Can you update us on the progress of new renewables projects? What's your target in terms of renewables growth? Could you give us more details of your pipeline? Thank you, Mar.
It is clear that we are facing a window of opportunity coming from the implementation of a series of initiatives at the European and at national level, referring to the Next Generation Fund, the Transition Mechanism, and the PNIEC, the Integrated Energy and Climate Plan of Spain, which envisages a very significant expansion of renewable capacity by 2030, a scenario in which we are convinced of being a relevant actor. In our latest strategic plan, we were including EUR 2.8 billion growth CapEx for 2.8 gigawatt renewables addition in the period 2020-2022. In the new business plan for the period 2021-2023, we will review our target, including CapEx and new installation objectives, so we can ask you to wait a couple of weeks to get all the details.
What we can advance is that the plan will be focused again on increasing organic growth in renewables and network as key drivers in the energy transition process and accelerators of the economic recovery of the country. Regarding our pipeline, we have been working intensively on developing it so as to support these future deployment targets, a large and diversified pipeline ensures a profitable growth path, minimizing operating risks. As you could see on the presentation on slide number 6, as of the 30th of September 2020, we can report a growth pipeline of 25.7 gigawatts until 2026. Out of this pipeline, as we have said, around 30% has TSO awarded connection points with a significant weight of solar, around 65%. The next question is also for you, Pepe, regarding the Royal Decree 2020. What's your opinion about renewable connection points? Okay, thank you, Mar.
This Royal Decree published in July established, among other things, a development milestone for new renewables connection that should be met for the guarantees not to be executed. This measure is designed to avoid speculation, and we believe it will help rationalize the process of increasing renewable capacity over the next decade, improving visibility. In the same way, it established for those in progress, access an exit window for those developers who thought they could not meet these development milestones. In this way, the promoter would recover the guarantee, and the capacity would be returned to the system. The total figure of connection given up at sector level amounted to nine gigawatts, out of which one corresponds to Enel Green Power España. Okay. The next question for you, Luca. What's your view on the PPA market? Are you working on new PPAs? Thank you, Mar.
On this question, we noticed a lower appetite for this product under this uncertain environment caused by COVID-19, the lower power prices, and the announcement of new auctions, so their liquidity has dropped. As a potential buyer, this is not a problem in our case as we are long-haul customers and short-haul generation, and this situation provides us with the opportunity to buy power under PPAs at very attractive prices, currently very well below the €40 megawatt hour. We believe this is not a structural situation, so when emergency period ends, market prices should recover and the PPA market should become more attractive and liquid again. In any case, when Endesa buys a PPA, we always retain the option to acquire the plant at the end of the agreement.
As a seller of a physical PPA to our customers, out of the 65 terawatt hours sold by Endesa at fixed price, around 5 terawatt hours from B2B customers are potentially interested to sign fixed PPAs nowadays for 10-15 years duration. These customers indeed demand fully customized offers for much larger, complex, and diversified supply profile. Okay. Next question is about M&A. Are you considering any organic growth opportunity? What could be of interest, Luca, for you? Thank you, Mar. About potential M&A transactions, you know that we are always scouting for opportunities related to our core businesses with the main focus on renewables and distribution. As it is evident by the recent activity, the current environment is increasing M&A opportunities, and as always, we will be very perceptive given that we plan to accelerate organic and inorganic growth in renewables.
In any case, our priority here is clear: transactions must have a strategic fit and create value for our shareholders. Endesa's sound balance sheet provides us with optionality to make bolt-on investments at attractive prices if such opportunities materialize. Thank you, Luca. Pepe, we start now with all the questions received about the new renewable auction. Can you comment on the outlook for renewable auctions in Spain? Would you consider taking part in them? Do you see the need of these auctions? When do you expect them to take place, and do you expect them to be particularly competitive? How should the new mechanism work? A lot of questions about this topic. Yeah. Okay, thank you. Thank you, Mar. Well, the PNIEC envisages the development of some 60 gigawatts, that is 5 to 6 gigawatts a year, of new renewables up to 2030, which will be partially articulated through auctions.
We recognize that the ambitious renewable capacity additions plan set by the PNIEC can't be undertaken only by large utilities. In this sense, this auction mechanism is mainly designed to cope with the financial needs of small project developers and industrial producers with a higher necessity of revenues predictability. The Council of Ministers approved yesterday the Royal Decree on Renewable Auctions after gathering part of the proposal from the public consultation and from the CNMC report published in September. Now, the Ministry of Ecological Transition should approve a ministerial order setting the conditions for the first auction, likely to be held before year-end. We still need to analyze in detail the definitive text of the Royal Decree, but overall, we believe that the changes introduced are in the right direction, as one of our main critics related to the settlement mechanism has been considered.
About the mechanism, the new remuneration system will be based on the long-term recognition of the price of energy, also introducing some improvement to avoid the market distortions. We plan to participate, as we have done in previous processes, but being an integrated company in Iberia, we don't depend on these auctions to carry out our growth plan in renewables. Thank you, Pepe. We have now one question about the gas business. Luca, I think this is for you. Do you expect gas margins recovery due to the current increase in gas prices? Thank you, Mar. Our expectation for 2020 points now to get a gas gross margin aligned to the target announced in the last business plan.
As we forecasted, gas prices rebounded from the low record levels marking the worst moment of the COVID crisis, and we are more confident that this trend will be maintained in the coming months. TTF gas price recovered in the third quarter to levels close to EUR 13 megawatt hour, thanks to the lifting of the global lockdowns and the rise of demand in Asia, the reduced nuclear output in France, and the fall in the Norwegian gas supplies. In October, TTF traded close to EUR 15 megawatt hour. On the spot market, this has not happened since December 2019. We now expect to reach a demand-supply balance starting in 2022, supporting this better gas price trend. In addition to this, we may have some positive from the opener process schedule for 2021, which should also help to support the gas margin next year. Thank you, Luca.
The next question, Pepe, is about the CO2 prices. What's your view on CO2 prices considering the new EU targets and the Brexit impact? Will new non-ETS sectors need to be included to keep the CO2 prices at high level? Thank you, Mar. I would say that the Green Deal will implement policy reforms to ensure effective carbon pricing throughout the economy to encourage changes in consumer and business behavior. The European Commission indeed foresees CO2 prices of €32-€65 per ton in the year 2030. Also, really confirming this trend, last October the 8th, the European Parliament backed amendments that raised the European Union 2030 emission reduction target to 60%, a target that is 20 points higher than today and above the 55% proposed by the European Commission.
In addition to this, last week, we knew that the European Commission initiated the consultation of its amendment of the European Union Emissions Trading System Scheme initiative. This revision will include both the number of sectors included, the increase of the number of sectors included within the emissions trading system scheme, as well as a stricter, let's say, limit on emissions. Both measures should trigger a price increase in the CO2 rate. We welcome this proposal as we believe that it is necessary and urgent to move forward in accelerating the decarbonization process and the energy transition. This must be a priority for society and for governments. Regarding long-term prices, do you expect the Iberian forward price curve to move to contango following the French and German curves? Given the current lower electricity price scenario, do you think it could affect the profitability of your renewable projects?
Do you want to take this, Pepe? Okay, thank you. Thank you, Mar. During the last summer, we saw important recovery in demand and commodity prices that supported forward prices up for 2021 and 2022. OTC prices for this year reached levels of €46-€47 per megawatt hour in August, but they are now trading slightly lower, around €44 both years, affected by the uncertainty created by the second wave of the infection within the COVID crisis and the volatility of commodities, especially CO2, that has weakened in the last weeks from the €30 per ton of August to current €24-€25 per ton. As previously commented, gas prices are now trading at more reasonable levels with PVB around €14-€15 per megawatt hour, mainly due to sustainability and higher LNG demand in Asia.
While CO2 prices should tend to rise in view of the European Union's ambitious emission reduction target, indeed, the market consensus averaged higher CO2 price levels. Considering this, we believe that once the COVID fades, the price will again stabilize at levels around EUR 50 per megawatt hour. It is true that the increasing weight of renewables in the mix is expected to be more volatile and have a deflationary impact on electricity. However, on our estimate, for the next 10 years, the Iberian electrical system will still rely on CCGTs as backup technology supporting the power prices. Thank you, Pepe. We go back to Luca. The next question is about competition in supply business. What do you think about the evolution and sustainability of the supply margin? How is the current competitive environment, and how do you expect it to evolve in the coming years? Thank you, Mar.
The competitive intensity in the Spanish energy market remains fierce as in the previous years, with strong presence of supply companies, new entrants, and new operators, mainly from the oil sector, such as Repsol, Cepsa, and now also Total. In addition to the traditional incumbents, they've increased their pressure trying to defend their market shares. This has made the churn rate increase in third quarter, moving from 10.4% to 11.6%. We are the main player, and our strategy aims at defending our market share and margin in this competitive scenario. In this regard, we have been able to reshape our customer mix to retain most viable customers, as shown in the sustained achieved supply margin slightly above €10 per megawatt hour, which has more than offset the lower customer volumes.
We have undertaken also a strong commercial focus through value proposals adapted to our customer needs, further campaigns accompanied by corporate communications, and through the announcement of remote sales and the development of new channels. Our objective in B2C is to ensure our leadership through our deep knowledge of the client, while the priority in B2B is to increase the value of the high-consuming customers' portfolio and to grow in the SME segment. Luca, on the same topic, given the falling spot prices and the economic situation, do you still expect the transfer from regulated customers to free market? Thank you, Mar. The local price recorded in nine months 2020, and the current regulation has encouraged some residential customers to switch from the regulated tariff. During the peak of the coronavirus pandemic, April became the month with the lowest electric bill since 2009.
This makes it very difficult for supply retailers to compete against the regulated tariff. It is also true that given the existing volatility in price, customers will soon be looking for stability to avoid risks in their electricity bills. A liberalized fixed price tariff protects them from peak increases as those seen in the past. In this sense, as commented in the presentation, we have launched interesting offers such as the recent Tarifa Única, where customers will pay a fixed monthly fee regardless of their volume of consumption. We have received some questions about the outlook for non-Mainland generation. Luca, have you seen a recovery in non-Mainland cost compensation in Q3? Is the cost recognition under discussion with the government in order to make a better cost pass-through? Thank you, Mar. We already touched upon some of this in the presentation.
Anyway, the rebound of commodity prices experienced since the summertime has allowed a more normalized quarter in non-mainland generation business, providing an EBITDA in third quarter 2020 of € 64 million, which probably compares with a minus € 13 million recorded in second quarter. Despite this improvement, nine-month 2020 cumulated EBITDA amounts to € 116 million, still 45% lower than last year. The approval of the Ministerial Order on Full Compensation last August 7 has brought limited improvement to the remuneration formula as some of our requests were not finally addressed. It has just modified the price of some references we requested for liquid fuels, but among others, it doesn't recognize all logistic costs and maintains the references for natural gas prices, which do not reflect the real cost. The volatility of our revenues in 2020 clearly confirms our claims are right.
As this Ministerial Order does not guarantee the full pass-through of the full cost, which should be the case in a regulated business, we will continue working with the regulator in order to introduce more rational references. We request the formula to be redefined or put in place the full auction considered in Royal Decree 738 of 2015. Non-Mainland generation is a regulated business with a 5.58% rate of return; hence, it made no sense to incur losses when it comes to cost recognition. Regarding our full-year estimates, the sharp drop in demand accumulated in the year, we're talking minus 14%, makes us more cautious in our forecast. Our latest estimates point to a gap of about EUR 50 million versus the EUR 300 million EBITDA target announced last November. Obviously, more details on this new target will be unveiled in our new business plan on November 25th.
Thank you, Luca. Pepe, about capacity payments. Do you expect a capacity mechanism to remunerate CCGT plants anytime soon? Is there any indication of the government working on any reform of the energy market? Thank you, Mar. Well, the last indication we have is that the growing penetration of renewables prompted the Spanish Ecological Transition Ministry to run a public consultation in September 2020 on the implementation of a new capacity remuneration mechanism to ensure security of supply in the context of the forthcoming closure of Spain's coal and nuclear plants. Market participants could submit their proposal until September the 25th, and we are pending to receive some more news on this topic.
We have always insisted on the need of approving a new scheme reviewed and granted by the European Union to assure that hydro, nuclear, and CCGTs may act as guarantors of the needed security of supply of the system. This system should be awarded through a competitive process and be technology generically neutral to involve generation, storage, and demand management. We believe that there is an urgent need for a model of capacity market similar to those already in operation in other European countries, which incentivize the power needed to guarantee demand coverage. Thank you, Pepe. Luca, some questions about the recent budget law proposal. What could be the impact from the increasing corporate taxation included in the proposed 2020 budget law? What other fiscal changes included in the budget may impact your business? Thank you, Mar.
The government has just presented a 2021 budget draft law, which will now seek parliamentary approval and ask changes as still possible. For large corporates, i.e., with more than EUR 40 million of turnover, the government is currently proposing to tax 5% on dividends and capital gains received by Spanish companies from their subsidiaries, both domestic and abroad. Currently, those dividends are 100% exempt of tax payments, and the proposal shows that 5% of those will have to pay a 25% tax. We need to make an in-depth analysis of the draft law to be able to fully assess its impact, but today, I can confirm the potential impact seems very limited. Luca, another question about the liberalized business. How have price dynamics impacted your short position? Thank you, Mar. We have always adjusted our strategy to the different market conditions.
Since fourth quarter 2019, we have been managing our short position, benefiting from the depressed low prices. Fuel price in the third quarter recovered from the lows recorded in second quarter in the worst moment of the first wave of the COVID pandemic, but we are still able to obtain benefits from the management of the short position, allowing us to keep on maximizing this strategy along the period. Short position had a positive effect of about € 140 million at gross margin level when compared to end-2019. For the rest of the year, the short position will depend on the evolution of electricity prices as well as the evolution of commodities, and based on this, we will actively manage the purchase of energy from OTC or spot market. Luca, also did you benefit from balancing service also in Q3? Thank you, Mar.
Due to our long customer position, we are net payers in ancillary services market. Therefore, the increased cost of these services in end month 2020 has resulted in a net cost of €38 million in end month 2020, which represents a worsening of about €40 million compared to the same period last year. Compared to 2019, a year of very low ancillary service cost, during end month 2020, this cost had been higher but more normalized. We now expect them to show a more moderation in fourth quarter for seasonal reasons as thermal facilities will increase its stake in the spot market. Thank you, Luca. We have received a very strategic question that is clearly for you, Pepe. Do you think the recently approved decarbonization strategy increased opportunities for hydrogen investments? Do you see hydrogen as part of your future strategy? Okay, thank you, Mar.
The Ministry of the Ecological Transition approved last October the Spanish green hydrogen plan. This plan could require an investment of EUR 8.9 billion within the next decade, but the government has not established yet how much of this investment will be publicly funded. In any case, these projects are eligible for the European funds. We are very interested in this opportunity and have already sent our comments on the hydrogen roadmap to the Ministry. Hydrogen can be an enabler to decarbonize hard-to-abate sectors such as the industry of heavy transport. The potential of hydrogen is enormous. It enables to replace a very important part of the current consumption of oil and especially natural gas, which places it as a key element in the energy transition towards a decarbonized economy. At this stage, our hydrogen projects are in pilot phases.
We have already built up a pipeline of 24 projects with a related Capex of more than EUR 1 billion, included within the list of projects submitted to be eligible for the European funds. One of the potential uses may be in the Compostilla area, our coal power plant, where, among the future EU plans for the region, we are analyzing the construction of a hydrogen production plant with the involvement of Endesa and an industrial partner. Our portfolio includes projects aimed at the use of hydrogen for electricity generation, as well as for the use of industrial processes and sustainable mobility. This technology may as well be particularly useful in our future decarbonization plans in the non-Mainland system. Thank you, Pepe. Luca, we have one question about the Portuguese renewable auction. Can you explain the rationale of this auction?
Why not developing capacity directly, which would be the main revenue stream for the batteries, trading, or ancillary services? Okay, thank you, Mar. As commented in the presentation, Endesa was awarded a lot of 99 megawatts of solar power plus 20 megawatts of storage in the second auction of renewable energy sponsored by the Portuguese government. The plant will be designed, built, and operated by Enel Green Power, and will be the first renewable project with storage on the Iberian Peninsula. The project, which is expected to come into operation in 2024, will be located in the Algarve region, and its construction will involve an investment of approximately EUR 90 million.
In accordance with the conditions of this auction, Endesa will have to pay EUR 3 million as a fixed fee per year for 15 years, which is about EUR 30,000 per megawatt per year, and assign a one-way contract for difference contract with EUR 60-EUR 70 per megawatt strike price, which is currently out of the money. In exchange, Endesa will have total freedom to use the energy and the associated batteries, and we can freely sell the energy to the pool, corporate PPA, or other combination that suits our integrated energy strategy in renewables, as well as receive revenues for providing ancillary services with the storage system.
In essence, for us as a vertical player, this is equivalent to a merchant project where we pay a fixed fee for the connection point, and obviously, in which we aspire to maximize the achieved price thanks to our trading capabilities and to our supply business. The energy will be supplied to the, obviously, clients that we have in Portugal. It's about 1 million clients now, where we are the second player in the regions, and we expect to have a return on equity on a leverage basis of about 10%. Our strategy in Portugal aims at growing both in customers and renewable capacity. Our long customer positions in Portugal, increasing year on year, allow us to maximize the integrated margin and profitability of these projects thanks to our trading capabilities. Thank you, Luca. We have now one question about the dividend policy. What is the right payout ratio?
Could we see over time lower payout and more Capex? Thank you, Mar. This clearly is from Mr. Gandolfi that always asks about dividend a few weeks ahead of the business plan. Anyway, while obviously the dividend policy is something that we will unveil in the strategic plan update that we present next November 25th, I can anticipate that, obviously, a 70% payout benchmark set for 2022 marks our medium and long-term dividend outlook. We do not expect, as of now, any deviation in this regard as it reflects the company's new growth profile, which combines a sustainable equity story with a healthy balance sheet that allows us to take advantage of future investment opportunities while providing shareholders with sustainable and attractive long-term profitability that is above the sector average. Okay, last question about the competition.
Do you see the oil and gas companies competing on the tenders for the PPA or as well for the end customer? Which advantages do the utilities have versus the newcomers? Thank you, Mar. This is from another analyst friend, obviously. Anyway, oil companies probably are one of the biggest threats to market shares of the Spanish utilities in the coming years. These companies, with high financial muscle, are following similar patterns in their development of the business, small to medium-sized acquisition, and organic growth. They are trying to replicate our integrated model by acquiring customer portfolios and renewable capacity. Despite competition is expected to become tougher, we consider they are rational competitors. They are listed and need to create value for their investment. Hence, they are probably paying up or being more aggressive as new entrants and probably will be more rational along the way. Okay, many thanks.
Pepe, thank you, Luca. At this point, we have tackled all the questions received. Just remind you, as always, that our team is available to help you in case you have further questions. Thank you very much, and see you in our Capital Markets Day next 25th of November. Bye.