Good morning and welcome to the first half 2020 results presentation, which will be hosted by our CEO, José Gálvez, and the CFO, Luca Passa. Following the presentation, we will have the usual Q&A session. As we did for the Q1 results presentation, we kindly ask those connected to the call or webcast to send questions only via email at ir@endesa.es. Thank you for your attention, and now let me hand over to José Gálvez.
Thank you, Mar, and good morning to everybody. As usual, I would like to start by commenting on the main highlights of the period. In the first semester of 2020, we have continued to deliver solid financial results. EBITDA increased by 22% compared to last year, 3% on a like-for-like basis, excluding extraordinary impact for the net effect of personnel provision for EUR 356 million booked in the first quarter. This positive performance was mainly driven by the resiliency of the liberalized business against the COVID-19 backdrop. During the second quarter, we have seen a strong acceleration of the decarbonization of our generation mix, with the closure of all mainland domestic coal fleet last June 30th. Additionally, the steady pace of the regulated distribution business has greatly contributed to mitigate the adverse backdrop effects seen so far. On the bottom line, net income increased by 45%, 11% on a like-for-like basis.
Moving now to slide number four. Before analyzing operating and financial performance of the period, let me spend the next couple of slides commenting on the macroeconomic and regulatory backdrop against which we have operated throughout the year, starting with the market context characterized by the sharp downturn in the Spanish economy seen during the first half of the year. The COVID outbreak and related lockdown has led to an economic downturn of 22% GDP over the period. This extraordinary situation has caused a collapse in demand, commodities, and pool prices. Mainly mainland and non-mainland demand dropped by 8% and 13% respectively. This, together with a general bearish scenario on commodities, caused the average pool prices to plummet by 44% to EUR 29 per MWh.
When it comes to our business, the resiliency of our integrated business model has been ensured by a combination of a higher proportion of regulated activities not affected by the demand drop, suppliers' portfolio geographical diversification that guarantees very limited disruption on the supply chain, and a leading customer position, as well as a diversified customer base. From a financial standpoint, Endesa combines an extremely healthy leverage position and limited refinancing requirements, coming no exposure to current risks. To conclude, we expect a limited impact from the current market backdrop, thanks to the resiliency provided by our integrated business model, our long customer position, and our hedging policy ensuring a natural protection against upheavals. This, together with the strength of Endesa's balance sheet, allows us to comfortably navigate throughout this period and confirm the dividend policy announced in the strategic plan.
Let's now take a look at the different initiatives taken so far by the different administrations in supporting the economic recovery on slide number five. Today, more than ever, the regulatory initiatives, both at the European Union and national level, must play a key role to set up a favorable investment framework to spark up the economic turnaround. The Green Deal, the Next Generation Fund, and the third transition mechanism have been devised to help the transition and the economy relaunch while ensuring social support for the most vulnerable sector. All of these European initiatives will be key pillars to facilitate support for COVID-19 economic recovery plan and represent strong support for sustainable investment through a public and private investment boost.
Concerning the Next Generation Fund, an agreement has been reached with Spain to receive approximately EUR 140 billion, of which EUR 72 billion in grants, equivalent to 7% of GDP, increasing the possibility of a faster GDP recovery during 2021. As far as Spain is concerned, latest regulatory development, like Royal Decree Law 23 for the energy transition and economy recovery, is a major step in the right direction, as it brings clarity and stability to relevant items required to speed up the energy transition. At Endesa, we can play a meaningful role in the recovery in Spain through the resiliency of our business model, as well as our financial flexibility. With an adequate framework and the necessary regulatory and fiscal measures being implemented, we could raise our CapEx plan by approximately 30%.
We have devised an accelerated plan of EUR 7.5 billion and incremental around EUR 1.7 billion over the 2020-2022 period, by which we expect to become one of the Spanish companies with the largest investment plan, having a multiplier effect on the country GDP of EUR 2.7 billion and being able to generate 12,000 direct and indirect jobs and around 27,000 indeed jobs during each of the years of this plan. Endesa is also determined to contribute to mitigating the social and economic impact of COVID-19 by implementing a series of other actions aimed at supporting its customers, suppliers, and employees. Entering into the operational performance of this first half of 2020, on slide number six, overall CapEx was equal to EUR 0.6 billion. Renewables accounted for the lion's share, with 37% of the total CapEx channeled, mainly towards the development of new capacity.
Distribution business followed with 31%, mainly devoted to grid digitalization, a key correspondent of our business plan. Conventional generation and retail segment, including Endesa X, received 21% and 12% of the total investment, respectively. Around 45% of the total investment was devoted to asset development, especially in renewables, and to a lesser extent in distribution. Before diving into the financial performance, I would like to review the progress and comment on the main achievements made so far of our key strategic pillars in the period. On slide number seven, we can see that renewable capacity represents now around 44% of total mainland capacity, and we are well on track to reach the 60% target set out in our business plan once imported coal plants will be phased out by 2021.
Around 0.9 GW of new renewable projects brought into operation at the end of 2019 have partially compensated the thermal output loss with coal out of maintenance since April 2019, while continuing in reaching a record renewable output of 7.4 TWh, or a 2.5 TWh increase versus the first half of last year. As a result, the share of emission-free production increased to almost 90%, 16 percentage points higher than in the first half of 2019. Moving on to slide number eight, to ensure not only current business plan target, but also a long-term solid capacity addition pace, we are continuing to increase our pipeline of renewable projects. Our total pipeline now stands at 24 GW, with a significant weight of solar, around 70%. Out of this pipeline, around 30% has TSO awarded connection points.
Moving on to slide number nine, the decarbonization of our generation mix has accelerated and is detailed in slide nine. Last June 30th, 2.1 GW of Endesa's coal-fired generation, accounting for more than 40% of this technology's stored capacity, was formally disconnected, representing a decisive step in the gradual phase-out of our coal fleet. Moreover, during 2019, we submitted the formal application to close down Litoral and As Pontes imported coal power plants, which will be phased out by 2021, one year ahead of the announcement in the last capital market day. Along with this request, we have developed just transition plans based on a shared value creation approach to the specific generation site.
These plans include significant investment in new renewable energy facilities in the surrounding areas, which will lead to the creation of direct jobs, not only for the dismantling of the coal-fired plants, but also for the construction of new ones, enhancing activity and employment, thus mitigating the impact on the affected areas. A relevant consequence of this closure process has been the low percentage of income from coal, reaching a level of around 1% from total revenues, and progressively decreasing towards 0% in the upcoming years. Advancing on to slide number 10, regarding networks, Endesa's distributed energy suffered from the drop in energy demand, a consequence of the lockdown effect, presenting a reduction of 8% year on year. Operational performance indicators showed a slight disparity. Losses reached 10.3%, or a 0.4 percentage points increase versus last year, impacted by the COVID backdrop.
Let me underline that we continue to use all the tools at our disposal to return to the path of reduction that we were on. Regarding the minutes of interruption, a drop by 3% to 22.1 minutes in comparative terms adjusted by the effects of the storm Gloria. Being focused on increasing efficiencies, OpEx spend per end user declined by 3%, thanks to the efforts in digitalization operational optimization. Distribution in Spain enjoys a stable framework, and remuneration is not exposed to volumes. In this framework, we continue to progress on our network digitalization process, which will enable us not only to improve the grid efficiency and resiliency, but also to integrate a growing amount of new renewable capacity. Moving on to slide 11, we detail the retail and Endesa X businesses.
The drop in Spanish demand has led to a 10% decrease in total gross sales, affecting mainly B2B, minus 14%, or minus 4.5 TWh, strongly hit by the deceleration of the economy. When it comes to the breakdown by segment, industrial sales decreased by 11%, that is 2.4 TWh, while SME shrank by 31%, that is minus 1.5 TWh. The total customer figure slightly decreased by 1%, 0.1 million customers, due to the increased competitive intensity in the sector. This customer loss, together with the abnormally milder temperatures during the winter, explains the small decrease in the B2C segment. As you know, through Endesa X, we aim at capturing the opportunities coming from new value-added services and infrastructures. In terms of infrastructure development needed to support electric mobility, the number of charging points still grew significantly by 14% to 5.7 thousand compared to full year 2019.
Endesa X increased its e-Home contract by 6% to a total of 1.8 million, excluding third-party billing customers. I will now hand over to Luca Passa, who will present the details of our financial figures.
Thank you, Pepe. Good morning, ladies and gentlemen. I'm now on slide 13, further deepening the analysis of the main operating and financial performance of the period. Reported EBITDA increased by 22%, net income rose by 45% to EUR 1.128 billion. On a like-for-like basis, once netted from the previous mention, no recurrent effects, EBITDA would have increased by 3% to EUR 1.959 billion, while net income would increase 11% to EUR 861 million. Funds from operation reached around EUR 1 billion, 10% above last year. Net debt increased by 11% versus full year 2019 to EUR 7.1 billion.
The change is mainly attributable to the interim dividend on 2019 results paid in January this year, amounting to EUR 741 million. Moving now to slide number 14. Before moving into the detailed analysis of the semester, let's have a look at COVID-19 estimated impact on our financial results. While the lockdown had little impact on our activity in the first quarter, the second quarter reflects more negative implications as the state of alarm in Spain was extended from March 14th to June 21st. As of today, it's very difficult to estimate future COVID-19 impact due to the main uncertainties on the recovery path and time frame. As of end of June, we have estimated a net impact of around EUR 80 million at the EBITDA level, mainly due to lower demand, and EUR 20 million in D&A from the update of bad debt provisions in accordance to IFRS 9.
At net income level, said impacts would translate to around EUR 75 million. In absence of these estimated impacts, our like-for-like EBITDA would have shown an 8% increase to EUR 2.39 billion, and our net ordinary income would have increased a remarkable 21% to EUR 936 million. We expect a new normality period in the coming quarters to bring more stability to the economy. On the medium to long run, the current emergency should not have any meaningful impact on our company's forecast. All data gives confidence to reach our 2020 announced targets net of the external provisions already commented. Now I would like to comment on the market context of the period on this financial release, and I'm now on slide 15. The Spanish mainland demand fell by approximately 8% versus previous year, already picking up on the full impact of the economic crisis unleashed by the pandemic.
Since the declaration of the emergency state till now, electricity demand has fallen minus 10.2%. April and May were the worst months impacted by the lockdown and the 15 days out of non-essential activities in April. In June, we have seen some demand recovery. All in all, mainland demand in Q2 fell 13%. During the month of July, demand is still negative but shows some signs of improvement thanks to the economic reactivation. The sharper falls affected industrial demand and SMEs impacted by restriction on economic activities, while residential demand increased due to the confinement. In a similar way, in Endesa concession area, gross demand decreased by 7% and even lower in adjusted terms with a contraction of 7.4%, mainly in the second quarter, with demand variation of minus 11.3% and minus 11.8% in adjusted and non-adjusted terms, respectively.
This development is mainly driven by the drop in the industry and service segments for the above-mentioned reasons, barely offset by a slight increase in the residential sector activity. In that context, pool price continued to remain depressed in the second quarter, suffering from a combination of lower demand, low commodity prices, and high hydro production. Spain's wholesale prices averaged EUR 29 per MWh in the first half of 2020, showing a decrease of 44% versus the same period in 2019. In any case, during July, we are witnessing a recovery of pool prices averaging above EUR 34 per MWh in the first week of the month. Demand decrease, declining commodity prices, and lower pool price shape the context in which Endesa operated during the first half of 2020.
In this context, and now on slide 16, electricity sales in the liberalized business decreased in Spain and Portugal by 11% in terms of volume, minus 4.4 TWh. The unitary integrated margin resulted in EUR 35 per MWh, showing a 25% increase year on year versus the EUR 27.9 per MWh of first half of 2019. The sum margin increase has been possible thanks to the positive management of the short position, while generation and supply margins barely show variation versus the previous year's levels. Within the generation margin, the better generation mix supported by higher hydro and renewable output and the positive procurement margins in combined cycles were mostly offset by lower thermal margins and the negative from the removal of the 7% generation tax applied in first quarter 2019.
In supply, the positive margin effect, with unitary supply margin increasing from EUR 9 per MWh in first half of 2019 to EUR 10 per MWh in first half of 2020, aligned to the levels of full year 2019, was offset by the lower volume effect as sales decreased by 4.4 TWh in the period. Full year expectation at this stage points to a flattening of the margin in the coming quarters, with full year aligned to our guidance in absolute terms, while unitary margin is now expected to be around EUR 31 per MWh as a consequence of lower sales volumes driven by demand decrease. Lastly, we have already hedged about 100% of our 2020 estimated price-driven output at an average all-in price of EUR 74 per MWh, with an estimated all-in for integrated sales, including index energy, of EUR 64 per MWh.
For 2021, we have hedged around 92% of our estimated price-driven output at an average all-in price of around EUR 72 per MWh. Once we consider our total sales mix, that all-in revenue, including index energy, will converge to levels similar to 2020 reference. Finally, for 2022, we have started the hedging process by around 30% of our estimated price-driven output, mostly to our residential customers, with an estimated all-in price similar to 2021 at EUR 72 per MWh. We are now noticing the beginning of a rebound of prices in the forward market that makes us confident to hedge the remaining volumes at higher references. A few words on the gas business on slide 17.
Total sales have decreased by 13%, mainly as a consequence of the warm temperatures that affected domestic and international customers, the global situation of gas oversupply, and the worldwide demand slowdown caused by COVID starting in March. Total customers remain almost flat, increasing by 8,000 in the liberalized segment due to the active client attraction campaigns. This has been achieved despite the strong competitive intensity registered this year that led to a 1% point increase in the churn rate year on year. Our unitary gas margin climbed to EUR 4.1 per MWh despite lower demand thanks to better sales price references versus procurement costs. We have continued to take advantage of the arbitrage among markets and of the flexibility of our contracts. 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.
These margins include a positive mark-to-market effect from our gas derivative contracts, which will be flattened out over the year. Excluding this effect, the unitary margin would have amounted to approximately EUR 3.2 per MWh. Moving to the detailed analysis of EBITDA on slide 18, let me now briefly set out the main drivers. As already commented, once deducted the extraordinary effects booked in personnel costs, Endesa EBITDA stood at EUR 1,959 million, up 3% versus first half of 2019. Generation and supply EBITDA rose by 21% to EUR 903 million, supported by the sound increase in the integrated electricity margin of EUR 126 million and gas margins of EUR 76 million. Distribution EBITDA decreased by 4% to EUR 988 million. Finally, non-mainline generation EBITDA reached EUR 68 million, a 45% decrease. I will comment deeply on each business performance later on.
On slide 19, a quick follow-up on our efficiency program, which is consistently proving to be effective across all our business lines, containing costs despite growth and investment effort. Total reported fixed cost reached EUR 607 million, or a 39% decrease over last year's figure. Once deducted non-recurrent effects, fixed costs would have increased by 1.5%. Adjusted figures exclude mainly the provisional reversal from the commitments contained in the new collective agreement, an additional provision recorded for workforce restructuring plans in the first quarter, and the updating provision for workforce restructuring plans already in place. Our OpEx evolution remains stable versus previous year, with efficiency and positive effect from inflation partially offsetting perimeter and growth with higher CapEx in a new investment cycle.
The strong effort in renewable capacity development is leading to a slight increase in the unitary fixed cost, reaching EUR 47,000 per MW in first half of 2020 from EUR 46,000 per MW in first half of 2019 on an annualized basis, which will be reduced as the new capacity is brought into operation. In distribution, the digitalization initiatives of our processes and assets are bringing reductions in our operational cost, with EUR 41,000 per end user from EUR 42,000 per end user last year. Lastly, in supply, we have lowered the cost to serve to EUR 10.2 per customer from EUR 10.6 per customer. This is a consequence of leveraging on the digitalization initiatives such as the following. The number of contracts with the building rose by 20% versus first half of 2019, up to 4.2 million contracts.
Digital sales climbed from 10% in 2019 to 15% in 2020, while the number of digital contracts had gone to 5.1 million, up 13%. Note that the COVID backdrop has boosted the digital interaction with customers, getting very close or even exceeding the targets set in the strategy plan for 2022. Finally, the new collective agreement signed with the unions is expected to bring stability and increase efficiencies in the coming years. Focusing on the regulated business, I'm now on slide number 20. EBITDA decreased by 8% to EUR 1.56 million, with a lower gross margin, while fixed costs dropped by 10%. Distribution margin decreased by 5%, 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 the improvement of adjusted fixed cost by EUR 28 million.
This is mainly the results of certain inefficiencies. Sorry, the non-mainline generation gross margin decreased by EUR 69 million, mainly due to the loss of fuel margin due to the fall in international markets and O&M compensation. This is mainly the results of certain inefficiencies in the current regulation that do not allow for the full recovery of fuel cost in a very volatile market context, which have been aggravated by the current low commodity references. In this sense, results have been severely impacted by the negative margins from fuel compensation, the application of new remuneration parameters, and lower income from lower demand, partially offset by an improvement in adjusted fixed cost. We expect to notice a recovery in the second half of the year once the emergency state has been lifted and demand and commodity prices are returning to normalized levels.
In addition, the expected ministerial order on fuel compensation should help us to improve current fuel settlement, providing a partial pass-through of the cost. On the liberalized business on slide number 21, EBITDA reached EUR 903 million, or a remarkable 21% increase, backed by a EUR 166 million improvement in gross margin. This sub-margin increase has been possible thanks to the increase in the electricity integrated margin that was driven by the positive management of the short position, while generation and supply margin barely showed variation versus previous year levels. With the generation margin, the better generation mix supported by higher hydro and renewable output and the positive procurement margins in CCGTs were mostly offset by lower thermal margins and the negative from the removal of the 7% generation tax adopted in first quarter 2019.
In supply, the positive margin effect with unitary supply margin increasing from EUR 9 to EUR 10 per MWh in 2020, aligned to the levels of full year 2019, was offset by lower volume effect as sales decreased by 4.4 TWh in the period. In gas, gross margin reached EUR 140 million, showing a remarkable 120% increase, including the mark-to-market referred earlier, despite lower demand and thanks to better sales price references versus procurement cost. We have managed to take advantage of the arbitrage among markets and the flexibility provided in our contracts. Endesa X gross margin increased by 11% to EUR 63 million. Fixed cost increased by EUR 8 million when compared to last year once deducted the net provision release effect. Moving now to slide 22 on the P&L evolution from EBITDA to net ordinary income.
Starting from the EUR 2.35 billion reported EBITDA, D&A decreased by 4% to EUR 760 million, driven by the impairments on our generation assets carried out last year, partially offset by the adjustment on the nuclear fleet useful life set on the nuclear protocol, and the higher amortization in energy and power. Bad debts increased by EUR 26 million, out of which EUR 20 million attributable to IFRS 9, as commented before. Net financial results decreased to EUR -48 million, mainly driven by the impact of the update of the financial workforce and dismantling provisions due to the lower decrease of interest rates year on year. Income tax expenses amount to EUR 382 million, 65% higher than in 2019, driven by the net positive impact of the EUR 356 million booked in the personal expense line, which has an impact of EUR 89 million at income tax level.
Effective tax rate stands at 25.2%, higher than the 22.9% recorded in first half of 2019, mainly due to lower fiscal deduction. As a result, net ordinary income increased by 45% over the period. Moving to slide 23 on the cash flow evolution from EBITDA to free cash flow, funds from operation increased by 10% versus first half of 2019, reaching EUR 995 million due to the following effects: higher EBITDA after provision paid and net provision release of around EUR 115 million, working capital and others slightly worsened by 16%, mainly due to harder non-cash provisions and the effect of derivatives and commodities valuation, which could not be offset by the improvement of changes in working capital, mainly thanks to the improvement of regulatory residuals mostly from non-mainline compensation. Income tax decreased by 69% to EUR 22 million, mainly due to the higher corporate tax refund in first half of 2020.
The cash-based CapEx, 30% lower than in first half of 2019, also led the free cash flow to be positive at EUR 153 million in the first half, increasing by EUR 237 million versus first half of 2019. Moving to slide 24 on the evolution of net financial debt, net debt amounts to EUR 7.92 billion, almost EUR 700 million higher than the previous year. This increase is mainly driven through the payments of EUR 746 million in dividends corresponding to the interim gross dividend against 2019 results. The regulatory working capital decreased to EUR 867 million, mainly due to non-mainline system compensation collected this second quarter. The leverage ratio remains stable at 1.7 x. Gross debt has an average cost of 1.8%, similar to the one reported at the end of 2019.
Our latest guidance for the full year 2020 net debt points to a EUR 7 billion guidance based on the assumption of EUR 1.2 billion of regulatory working capital, assuming the cashing during the second half of 2020 of some pending amounts in non-mainland in accordance with the recently approved Royal Decree on Network Codes. In order to support our strategy now on slide 25, we are focused on increasing the use of sustainable finance tools within our reliability management activity and encouraging our counterparties and stakeholders to share our vision. In the aftermath of the pandemic outbreak to bolster the company's liquidity position, Endesa has executed two sustainability-linked Club Deal bank facilities for an aggregated amount of EUR 550 million.
In addition, upon renewal of the Euro Commercial Paper Program, Endesa set a new milestone by including an SDG indicator, the REN, to become the first corporate in Europe to formally list an SDG ECP program. Following the execution of these transactions in second quarter 2020, sustainable finance accounts for 44% of our total gross financial debt. Considering solely third-party debt, this percentage increased to 74%. Now, let me hand over to Pepe for the final remarks.
Thank you, Luca. To close this presentation, I would like to conclude with some remarks on our performance during this first half. In spite of the current backdrop in the first half of 2020, Endesa has offered a sound underlying performance, providing comfort towards a full-year target.
The resilience of our integrated business model based on a stable regulated EBITDA, a consistent liberalized business, a long customer hedge, and a robust financial strength are allowing us to cope with the volatile evolving scenario. A strong commitment at accelerating the energy transition also liberating on sustainable finance. Our goal, we remain strongly committed to protecting our people and supporting our communities against the pandemic disease. With the same engagement we have demonstrated since its outbreak, as of June 30th, 2020, expenditure on donation corresponding to the public responsibility plan and purchases of supplies related to the COVID-19 amounted to EUR 12 million. Lastly, the support teams are currently guarding the office. We continue to prioritize the health and safety conditions. Ladies and gentlemen, this concludes our first half of 2020's presentation. Thank you very much for your attention, and we are ready to take some questions.
Okay, thank you, Pepe. I'm sorry for the delay. Okay, so we start now with the Q&A session. So far, we have received questions from BBVA, Berenberg, Bank of America, Citi, Credit Suisse, Exane, Goldman Sachs, JB Capital, SocGen, and Mediobanca. Thanks to all of you. I think we still have some difficulties with the connection. Please hold on the line. Yeah, okay. We go ahead. I'll start with the first question, which is for our CEO, Pepe. Given the effect that COVID-19 has had on first half results, could you give us a reference of the expected impact for the second half of the year? Are you in a position to confirm the guidance for 2020?
Okay, thank you. Thank you, Mar.
I don't know if I would like to have the music back just to give me some enhancement to answer or not, but it's okay. Well, let me say that the second quarter accumulates the majority of the COVID-19 impact as the lockdown in Spain was extended from March 14th to June 1st. In this regard, I don't know if you are hearing me or not with the music.
I'm afraid that we are still listening to some music. Okay, Pepe, go ahead.
Do you hear me? I think so. I will try. I don't know if I am talking to someone, but in any case, we can hear something.
In any case, the impact of Endesa with regard to COVID-19 has been relatively limited thanks to the resilience, as we have said, of our integrated business model and the very low exposure of our regulated business to COVID. As of June 30th, we faced an estimated net impact, as Luca has said, of EUR 8 million at the EBITDA level, mainly due to the scenario of demand decline both in the liberalized business and in the non-mainland business. This was largely offset by the positive management of COVID-19. That said, this estimated COVID impact on our EBITDA, as again Luca has said, we have shown an 8% growth reaching EUR 2.39 billion.
Although it is very difficult to predict the future COVID-19 impact, the economy should stabilize, allowing for a more normalized state with the second quarter should be the most affected quarter, implying that the negative effects we have not affected the economy. In any case, the good operative results accumulated by Endesa so far will allow us to fulfill the commitment guidance of the year, net of the effect of the provision release, that is EUR 3.9 billion at EBITDA level and EUR 1.7 billion at net ordinary income level. In addition, I would say that Endesa has a sound balance sheet with low leverage and robust liquidity, standing out 23 months, and reinforced with the last agreement signs, implies a very wide margin of safety.
Thank you, Pepe. Sorry because we are listening all the time to music. Hopefully, everything is solved. The next question is also for Pepe.
What would be the expected impact on the following years, considering the current low forward prices?
As commented on in the presentation, our price-driven production for 2021 is 92% hedged, at a still high 86%. This is expected to further assimilate the revenue level of 2021. Similar to what we discussed in the first quarter, we believe our forward prices for 2021 and 2022 remain contaminated by the current scenario with the demand and commodity prices. OTCs for 2021 are currently trading at EUR 44 EUR 45, and at EUR 45 EUR 46 per MW hour for 2022. These prices still trigger negative clean spark spread, which is not realistic, being the CCGT, the combined cycles, the price-setting technology in Spain. In this situation, this makes us believe that this situation is conjunctural and that these forward references should keep on improving.
Thank you, Pepe.
The next question is for our CFO, Luca. Do you expect the relevant impact on budget provision by year-end?
Thank you, Mar. Based on ESMA, as of June 30th, we carried out a prospective adjustment of our provision in accordance with IFRS 9 criteria. The effect of this adjustment was higher expense for impairment losses on receivables from customer contracts amounting to EUR 20 million. The full year estimates will depend on the evolution of the economy and its potential recovery in the second half. As it has been the case to date, in the coming months, we will be constantly monitoring the evolution of macroeconomic, financial, and trade variables in order to update the estimate of possible impacts in real time, as well as allow, where appropriate, further mitigation with reaction and contingency plans.
I think we can go with some questions in relation to the net debt.
Again, it's for you, Luca. Could you give any color on the working capital evolution in the first half and how it should evolve in the second half? And what is the net debt guidance for 2024 and the expected regulatory working capital?
Okay, thank you, Mar. As FLEX already, we have seen some worsening of the working capital figure as of June. That should be the peak once the state of the arm has faded. We expect this impact to be partially absorbed by year-end in the region of 50%. We reckon that some working capital pressure is inevitable, but Endesa's balance sheet is sufficiently strong to handle this temporary increase.
When it comes to our estimates on net debt guidance for the full year, the guidance is now at about EUR 7 billion, based on the assumption of EUR 1.2 billion regulatory working capital, assuming the cash in during the second half of some pending amounts in non-mainland corresponding to Law 15 taxes in accordance with the recently approved Royal Decree on Network Codes. Regarding the regular working capital figures as of June 30th, it amounted to EUR 867 million, EUR 191 million lower than in first quarter, mainly thanks to the cash in amounts from 2020 state budget in non-mainland compensation. Out of this amount, EUR 519 million corresponds to the non-mainland system pending compensation.
Thank you, Luca. Next question is about the tariff deficit. Do you expect new tariff deficit in 2020?
Thanks, Mar. Our expectation has a little variation on what we already commented in May.
We are expecting a shortfall of the system revenue this year as a consequence of the reduction of the electricity demand, the fall in tax proceeds given the drop of power prices, and the measures adopted in Royal Decree 11 of 2020. We also see this decrease in revenues will be temporary and therefore unlikely to jeopardize the system balance. The rising deficit in 2020 will also be manageable given the recent approval measures, mainly the use of a minimum of EUR 450 million proceeds coming from the CO2 auctions and the application of system revenues of the cumulated tariff surpluses in the last five years, which amounts to more than EUR 1 billion, as said in Royal Decree 23/2020. These are very positive measures as they provide room to offset the potential COVID-19 impact without the need of increasing access tariffs.
In any case, we have already proposed different solutions to the ministry that may prevent the appearance of tariff deficit this year.
Thank you, Luca. We will go back to Pepe again. Now, how is COVID-19 and lockdown affecting your CapEx in 2020? Do you expect project delays until 2021? Can these delays affect the 2020 target?
Okay, thank you again, Mar. The answer is no. CapEx delays due to the COVID will not be significant in 2020. The actions carried out on the supply chain have enabled us to continue our investment effort without any significant incidents. Regarding the renewable project, some of the 500 MWs we are building will suffer, I would say, minor delays, mainly as a consequence of backlogs in the permitting process during the lockdown period.
This project will now shift to, let's say, January or February 2021 instead of December 2020, with a negligible impact on margins.
Okay, thank you, Pepe. Regarding dividends, Pepe, also for you, do you maintain the current dividend policy?
Thank you again, Mar. We are not considering any change in our current dividend policy. The financial strength of our balance sheet and the complete access to the capital market that we have at our disposal make it possible for our company to maintain intact the capacity to pay dividends to our shareholders despite the economic downturn. The strength of our business, together with our solid financial situation, gives us the necessary control to maintain the dividend policy as announced in the strategic plan.
Okay, we move now to more specific questions about business evolution. We start with the competitive pressure, Pepe.
Given the fall in spot prices during Q2, did you see customer or liberalized tariffs switching to regulated tariffs?
Okay, Mar. I would say that since the beginning of the year, the total customer figure slightly decreased by 1%, 89,000 customers, due to the increased competitive intensity in the sector. It should be noted that two effects have come together: a halt in the face-to-face channels, which is where the main volume of portfolio management is concentrated, and a drastic fall in the power prices, which has left the regulated tariff reference price well below our reference price for capturing on the free market. In this regard, we have noticed some reactivation starting in June, thanks to the launch of a new commercial offer and the start of the face-to-face sales once the state of emergency finished last June 21st.
We expect this trend to continue along the second half of this year, allowing us to stabilize our customer base. Nevertheless, in view of the current intensive competitive situation and the market environment, competition is expected to remain high in the second half of the year.
Okay, thank you, Pepe. On the gas business, this is for you, Luca. Do you expect gas supply margins to be affected from low demand in the second half?
Thank you, Mar. As shown in the presentation, Endesa's gas cost margin reached EUR 140 million in the first half of 2020, showing a remarkable 120% increase thanks to the better sales price references versus the procurement cost, and a positive impact of EUR 49 million from the gas derivatives market of the period, which we expect to gradually laminate throughout the year.
Regarding the procurement cost, we have continued to take advantage of arbitrages between markets and the management of our supply contracts, whose flexibility has allowed us to purchase cheap gas on the spot market. Our full expectation, we are not seeing material impact from lower demand in 2020, as the lower demand has been offset by purchases in the spot market. Our expectation points to get gas cost margins slightly below the target announced in the last business plan. The situation in 2021 clearly is different in the sense that we still have around 35% of expected sales pending to be hedged, but we're confident that gas prices will recover.
We believe we have seen the bottom of gas prices and expect to experience some kind of recovery at the end of the year from the current levels, in addition to reopener processes scheduled for 2021 that should also help to support our gas margin for next year.
Okay, thank you, Luca. Moving now to a different topic about renewables, Luca. What impact do you expect lower electricity prices will have on renewables at ETA in 2020? How do you think this electricity price environment can affect future renewable projects? Is it profitable to invest in renewable at market prices of EUR 40, EUR 45 per MW hour?
Okay, thanks, Mar.
The gross margin data that can be seen on slide 21 in the first half presentation is an accounting figure, obviously for energy power, calculated on the assumption of all renewables output is sold to the spot market, being then affected by the poor price volatility. Note that nevertheless, this price effect is neutralized as the renewables form part of the integrated margin, given that Endesa manages all technologies in an integrated way. Energy power managerial gross margin contributed positively to the 126% increase recorded in the integrated margin for the period. On a full year basis, we expect energy power margin to be aligned to guidance as the effect of market prices can be recovered via hedges and incentives. Regarding the second part of the question, we believe that once the COVID-19 fades, the price will again stabilize at levels around EUR 50 per MW hour.
Therefore, profitability of our project should remain in the expected forecasted levels. We have recently stated that the energy transition to a clean generation mix needs a right price signal, as otherwise there will be no incentive to invest. We believe that power prices for 2021 and 2022 are still contaminated by this scenario with demand and local mobility prices driven by the pandemic. As a positive highlight, during the different phases of the confinement and once the state of alarm ended last June 22nd, we have monitored a loud bouncing back in the demand trend, still negative but improving. The rebound in the commodity price, especially CO2, has also helped the power prices to change their declining path, although they still remain below 2019 levels.
As we previously explained, carving forwards, although higher than a few months ago, still imply negative spreads for the combined cycles, which indicates they should keep on recovering in the future quarters.
Thank you, Luca. Next question is for you, Pepe. Would Endesa participate in these tenders in the new auctions even if the price can be quite aggressive? Do you think these tenders can be a threat for methane renewable projects, putting pressure on spot and forward prices and affecting customer commercial offers and supply margins?
Thank you, Mar. As set in the Royal Decree Law 23 of this year, the government authorized the early processing of the Royal Decree to regulate the renewable auctions. In this regard, the Minister for Energy Transition expects to host renewables auctions before the end of the year, and Endesa certainly plans to participate.
The proposed new mechanism for the auctions, similar to what is applicable in other European countries, said that the auction will be based on fixed prices per MW hour with a pay-as-bid system, instead of lowest CapEx per MW offer, but at the same time introduce an improvement to avoid the market distortion produced by a pure, let's say, feed-in tariff system. Where generators forget the market price signal and are interested in operating at all times. Among these improvements, we must highlight as positive the set of a limit pool price to receive the auction price, the so-called price for exemption of collection, which discourages negative prices or the fixation of certain percentage of the energy left exposed to merchant prices, not subject, therefore, to the auction price.
Overall, we believe that the proposed auction scheme is reasonable, is reasonably well designed, although we have already presented a full set of allegations that may improve this within the mechanism, mainly in the design settlement process affecting the supply companies.
Thank you, Pepe. The next question is also for you. Can you comment on the recent statements from the government regarding a possible electricity market reform by year-end? Do you think they will change the marginalist system? Do you expect a capacity mechanism to remunerate nuclear CCGT plants anytime soon?
Okay, thank you, Mar. We think that the minister was referring to the aforementioned proposed new auction mechanism setting the draft Royal Decree, which implies that the awarded projects are left out of the marginalist system.
We believe the mechanism introduced in the draft Royal Decree to avoid market distortion is, as I have said, reasonably well designed, but it can still be improved in the final version. Regarding the new capacity payments, 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 combined cycles may act as warrantors of the needed security of supply of the system once the massive installation of renewable capacity foreseen in the PNIEC put it at risk. In our opinion, the ministry's statement of these topics are a good signal of their intention to rule a new mechanism for capacity payments, but being honest, we have no more information on that.
Thank you, Pepe. The following question is also for you.
What's your opinion on new rules on connection rights set in Royal Decree Law 23, which is the situation of Endesa's pipeline, and if you can give a reference about the expected CapEx per MW?
Thank you again, Mar. Our overall opinion on Royal Decree 23 of the year is positive, as it should speed up, in our opinion, the energy transition in Spain, a key driver for the economic recovery. Specifically, on the rules for the connection rights within, they will rationalize the process of increasing renewable capacity over the next decade, reducing speculation whilst improving visibility and lowering costs. The purpose of the Royal Decree is to allocate license among renewable projects that are realistic and true, avoiding previous speculations. Concerning our pipeline, as we have seen on slide 8, it amounts to 24.3 GW with a significant weight of solar, around 70%.
Out of this pipeline, around 30% has transition system operator TSO awarded connection points. Lastly, our approximate CapEx per MW is something below EUR 1 million per MW for wind and around EUR 0.65 million per MW for solar, with an expected decreasing trend in the future as a consequence of technological improvement, lower manufacturing costs, and a decline in the raw material costs.
The next question is about the offshore wind. Would you consider new opportunities from offshore wind? If so, how would you acquire the technical expertise needed?
Thank you again, Mar. As we have stated on several occasions, we have no plans to venture into offshore wind, given that in Spain, wind resources are simply better on shore. We believe that the offshore project overall requires a longer development period that implies investors are more subject to regulatory and market changes.
In any case, we will remain attentive on the evolution of this technology.
Thank you, Pepe. We stand now with all the questions received about the outlook for the non-mainland generation. Would the impact due to cost recognition be mitigated in the second half of the year? What can be expected for 2021 and beyond that? If the regulation is not changed, with the outlook for commodities forward versus your already contracted fuel, would you expect more negative impacts in the second half of this year and the next year? How likely is a change in the regulation for avoiding such different cost recognition? Would it have retroactive impact timing?
Thank you, Mar. As of June 30th, non-mainland generation fuel margin is negative.
As a consequence, I would say, of the delay of the ministerial order of fuel compensation and certain dysfunction of the price recognition formula negatively impacted by the sharp drop of the international commodity market in the period. Current regulation settles the fuel cost for every semester in accordance with the average spot reference in that period, which is unrelated to supply condition from fuel suppliers. In the case of natural gas, regulation does not consider gas supply contracts. This procedure brings some temporary volatility to our result, given that it is not a full pass-through. During the first half of this year, and especially in the second quarter, gas and Brent prices collapsed, triggering conjunctural stress on our revenues from fuel compensation. We expect this situation to improve sometime in the third quarter once the commodity curves are showing some rebound, trying to return to normalized levels.
The government, I would like to say, is fully aware of this inefficiency in the regulation and was already preparing at the beginning of the year a ministerial order to partially, at least partially, improve this regulation. It was on hold during the state of emergency situation, but we now expect the ministry to resume this draft, hopefully during the next month. The draft order includes or will include price reference requested by Endesa for liquid fuels that maintains up-to-date natural gas prices that do not reflect, in our opinion, the real costs. Therefore, the initial draft does not allow a full pass-through of the fuel costs, and Endesa has presented allegations to this respect.
Regarding our full year estimate, we expect to notice a recovery in the second half of the year now that the state of emergency has been lifted and demand and commodity prices return to more normal levels. In addition, the expected ministerial order on fuel compensation should help to improve current fuel settlement. All in all, our latest estimates point to an estimated gap of something around EUR 20 million at EBITDA level versus the EUR 300 million target announced last November.
Okay, thank you, Pepe. We'll go back to Luca now, and the next question is about the hedging strategy. Have you already started selling volumes through 2022? What price range do you have? What would be the impact on your targets in 2022 of assuming the forward prices at 2022 of EUR 45 per MW hour in your estimates?
Thank you, Mar.
Regarding 2022, we have started to hedge our price-driven production, and to date, we are 30% hedged or about 12 terawatt hours, mostly devoted to sales to our residential catalog customers. We estimated the ordering price similar to the one of 2021, which is around EUR 72 per MW hour. We are now noticing the beginning of a rebound of prices in the forward market that makes us confident to hedge the remaining volumes at higher references.
The next question is also for you, Luca, regarding integrated margin evolution. Could you please update us on your expectation about the normalized integrated margin for the full year and future years in the plan? Do you perceive any headroom to revise upwards your future years' guidance?
Thank you, Mar. I have commented the full year guidance on the presentation, but I will repeat it.
Full year 2020 expectation at this stage remains basically the same, pointing to a slight flattening of the margin in the coming quarters to the end of 2020, aligned to our guidance in absolute terms with a higher unitary margin around EUR 31 per MW hour as a consequence of lower sales volume. Business plan expectation for the following years points to an integrated margin of around EUR 30 per MW hour in 2022, backed by a higher stake of renewables in our mix and better market conditions.
Thank you, Luca. The next question is again for you, Pepe, on the potential CapEx acceleration. Do you see any upside in your CapEx plans as a result of the government's willingness to incentivize the economy through sustainable investment, both in renewables and the distribution grids?
Okay, thank you, Mar.
I would say that, as already commented on in the presentation, we are determined to be one of the main vectors of economic growth and generation of employment in the post-pandemic scenario in Spain. Therefore, we maintain our capacity to potentially accelerate investment if there is an adequate framework and the necessary regulatory and fiscal measures being implemented. In this scenario, we could raise our CapEx plan for the period 2020-2022 by as much as 30%, taking it from EUR 5.8 billion at present to as much as EUR 7.5 billion, that is EUR 1.7 billion more. This increase of CapEx would be concentrated in 2021-22 and would be mostly devoted to renewables, EUR 1.1 billion, and distribution, EUR 0.6 billion.
This would have a multiplier effect on the country's GDP with EUR 2.7 billion annual impact during 2021-22, with more than 65% of the expenditure on Spanish suppliers and on the employment rate, with the potential creation of around 24,000 direct and indirect jobs and around 54,000 induced jobs during 2021-22. We expect to give more details of this plan in the next strategic update in November.
Thank you, Pepe. Question for you, Luca, on the potential fiscal reform and the potential changes in taxes in Spain due to recent comments made by the government about increasing its tax collection power.
The first answer, Mar, thanks for the question, is who knows.
But anyway, although there are no details on the context and eventual date of entering force of a tax reform in Spain, we believe that in these times of economic recession, a policy of tax incentives will be much more efficient in terms of collection for the state than the one that might involve tax increases. This is because a tax increase brings the risk of generating economic constraints in companies and individuals, while a policy of tax incentives contributes to the activation of investments, consumption, employment, and the economy in general, generating greater wealth and therefore a greater base on which to collect taxes. This is the trend that most of the European countries around us are following, leading for a later phase of economic recovery, possible tax increases.
The next question regarding Catalan tax, Luca. Is Endesa going to challenge it?
How long could it take a call ruling on it? What is your view on defending Endesa's position?
Thank you, Mar, again. We believe that this tax is unconstitutional due to the lack of environmental purposes and its duplication with other state taxes. It is abusive and breaches European directives. We are asking the government to appeal this tax directly, but in any case, we are going to appeal the settlements that have started to be applicable. The tax is in force since July 1st, 2020, and will have an impact on Endesa of EUR 56 million in 2020, of which EUR 53 million in generation, mostly of it in nuclear, and an additional EUR 3 million in distribution.
We are staying with you, Luca. The next question is about the coal phase-out. Will all coal plants be effectively closed by the end of 2021?
Should there be any dismantling cost beyond what is already provisioned?
Thank you, Mar. The expected deadline for the closure resolution, once a company has presented the request, is in the region of 18 months. Last December 27th of 2019, we submitted the formal closure request for our imported coal plants at Pontes and Littoral. So once the domestic coal plants Compostilla and Teruel stopped their operation last June 30th, we now estimate that by 2021, these two facilities will also be allowed to close, completing the total coal phase-out process in mainland. Regarding the dismantling cost, we are not expecting additional provision to those booked already in 2019.
Thank you, Luca. Different topic also for you. The next question is, do you expect further cost-cutting and efficiency measures to be implemented to take advantage of the positive one-off accounted for in Q1?
Thank you, Mar.
I would say that negotiations with the unions have continued during the second quarter, but no new agreements have been adopted so far, apart from the one already recorded in the first quarter, although let me comment that I think we are getting closer to a potential agreement with them. We keep on working on different efficiency improvement plans with the company to incremental ongoing cost savings. The net result of the provision is within the company ordinary net income based on our dividend policy. In any case, we maintain the guidance announced in our capital markets day last November of EUR 3.9 billion EBITDA and EUR 1.7 billion net ordinary income, and this is net of the positive provision effect.
The last question received so far is about M&A. Have you seen, Luca, new M&A opportunities in networks and renewables following the COVID-19 downturn?
Thank you, Mar.
I think we always look for opportunities related to our core business with main focus on renewables and distribution. The current environment obviously might increase the potential of M&A opportunities, and also we recently seen a transaction by, for example, EDP buying the assets of Viesgo. But as always, we look at all these opportunities given that we plan to accelerate organic and inorganic growth, but always with a very clear priority, which is strategic fit and creation of value for our shareholders. This is our balance sheet that provides us with the full optionality to make both on investments and attractive prices if such opportunities materialize.
Thank you, Luca. Now, if you allow me, as we had a lot of technical issues at the beginning of the call, we will repeat the two first questions. Both of them were for you, Pepe.
First one is, given the effect that COVID-19 has had on first-half results, could you give us a reference of the expected impact for the second half of the year? Are you in a position to confirm the guidance for 2020?
Okay, thank you, Mar. I will try just to give the same answer that I have given before. That always is difficult, but I will try to do my best. What we think is that the second quarter accumulates the majority of the COVID-19 impact as the lockdown in Spain was extended from March 14th to June 21st. In this regard, the impact on Endesa has been, let's say, relatively limited thanks to the resilience of our integrated business model and the very low exposure of the regulated business to COVID.
As of June 30th, we face an estimated net impact, as Luca has said, of EUR 80 million at EBITDA level, mainly due to the scenario of demand decline, both in the liberalized business and in non-mainland business, which was partially offset by the positive management of the coal position. In absence of this estimated COVID impact, our like-for-like EBITDA, as again Endesa has said, Luca has said, would have shown an 8% increase reaching EUR 239 million, although it is very difficult to estimate the future COVID-19 impact. The economy should stabilize, allowing for a more normalized second semester. Indeed, the second quarter should be the most affected quarter, implying that the negative impact in the first half is not expected to increase significantly.
In any case, the good operative results accumulated by Endesa so far will allow us to fulfill the committed guidance of the year, net of the effect of the provision release, that is EUR 3.9 billion at EBITDA level and EUR 1.7 billion at net ordinary income level. In addition, I would like to say that Endesa has shown balance sheet with low leverage and robust liquidity extending out 23 months and reinforced with the last agreement signed, implies a very wide margin of safety.
Okay, thank you, Pepe. Now the last question. What would be the expected impact on the following years considering the current low forward prices?
Thank you again, Mar.
As commented on in the presentation and in the previous meetings, in the first question, the first time that you asked me this question, our price-driven production for 2021 is 92% hedged at still high OTC references, and the integrated revenue is expected to convert to a similar integrated revenue level of 2020, that is something around EUR 62 per MW hour. Similar to what we discussed in the first quarter, we believe our forward prices for 2021 and 2022 remain contaminated by the current scenario of weak demand and commodity prices. OTCs for 2021 are currently trading at EUR 44, EUR 45, and at EUR 45, EUR 46 per MW hour for 2022, getting closer now to the EUR 48 per MW hour at which they were trading at the end of the year 2019.
These prices still trigger negative clean spark spread, which is not realistic being the combined cycles the price-setting technology in Spain. This makes us believe that this situation is temporary and that these forward references should keep on improving.
Thank you, Pepe. Thank you, Luca. So, there are no more questions. Just remind you that IR team is available to answer any further questions you may have. Thank you very much for your attention and have a nice summer break. Bye. Thank you, Mar.