Good morning and welcome to our First Quarter 2018 Results Presentation, which will be presented by our CEO, José Bogas, and by our recently appointed CFO, Luca Passa. Following the presentation, we will have the Q&A session open to those connected both on the call and on the web. Thank you for your attention, and now let me hand over to José Bogas.
Okay, thank you, Mar. Good morning, ladies and gentlemen, and thank you for joining us today. Let me introduce you, Luca Passa, I think quite well known by almost all of you, our new CFO replacing Paolo Bondi. I would like to take this opportunity to express my deep gratitude to Paolo for all these years of effort and dedication that have brought such good results, and wish him good luck in his new appointment, and of course, give Luca a warm welcome and wish him a very successful career at Endesa. As usual, let me start this presentation with the main highlight of the period. First of all, I will start pointing out the extraordinary results obtained by our liberalized business, with an increase of more than 100% at EBITDA level due to the normalization of the market context during this first quarter.
That, combined with the positive contribution of the regulated business, has resulted in a sound increase of 25% of total EBITDA in the period. Adjusted fixed costs decreased by 4% thanks to the different efficiency measures put in place over the last few years, which continue to bear fruit. Regarding the bottom line, the above figure's evolution has led to an increase of 47% of net income. Finally, let me remind you that a total gross dividend of EUR 1.382 per share on 2017 results was approved in the annual general meeting held last 23rd of April. Moving to slide number four, now let's start by briefly commenting on the main conclusion and proposal resulting from the Expert Commission report, an important milestone to define the energy and climate plan for the foreseeable future in Spain.
All in all, the initial reading is positive, as this report constitutes an important point of reference to broaden the debate about the energy model and the generation mix to which we want to evolve in the coming decades and to achieve the full decarbonization of the economy. The main conclusions and proposals are fully aligned with Endesa's strategic vision and position we have taken in recent years, among others, to take the steps towards demand electrification in order to achieve the full decarbonization of the economy. The fulfillment of this target will require, on one hand, to remove non-energy costs from the tariff with the aim of making it more competitive, while, on the other, a higher commitment from the diffuse sector.
To maximize the penetration of renewables, to extend nuclear plants' useful life, as they should play a key role in the transitional period and ensuring the security of supply, competitive electricity price, and complying with CO2 targets. To preserve efficient thermal generation, also through the creation of a capacity market mechanism, and to maximize the development of smart grid, as of key importance to allow for a higher share of renewables and distributed generation in the mix, as highlighted in the recent Deloitte report. Therefore, an adequate remuneration should be guaranteed to meet the requested level of investment. Overall, we should highlight that the main conclusions and proposal contained in the Expert Commission report are aligned with Endesa's strategic vision, and we share the belief in the importance of this step forward in the definition of the future energy model.
Moving now to the financial results, on this slide you can find the main financial figures of the period. As commented on before, EBITDA increased by 25%, while net income went up 47% compared with the first quarter of 2017. The main drivers behind these evolutions are as follows. First of all, the liberalized business shows a robust increase as a result of the recovery of extraordinary market circumstances experienced last year, and has been positively impacted by the favorable hydrology evolution in Spain and by the better condition in the gas market. Besides, the regulated business benefited from the consolidation of the remuneration update in distribution.
Concerning the increase of the net financial debt, it has been affected by the interim dividend payment and by an expected negative evolution of working capital consequence, among others, of the delay in billing collection due to Easter effect and the different number of regulatory settlements booked in both periods that will be explained in more detail later on. This situation will revert and normalize in the coming quarters. Let me briefly analyze the market context in which we have operated on slide six. Electricity demand showed an important growth rate, both in gross 2.9% and adjusted 32%. In Endesa's concession area, gross demand increased 2.6% and was driven mainly by the residential segment due to the cold wave suffered in the quarter and the effect of the recovery of the Spanish economy.
On the other hand, industry and services demand fell mainly due to lower activity in some industry segments, as well as the effect of Easter holidays. Electricity prices showed a reduction of 13% during the first quarter of 2019, down to EUR 48.1 per MWh a more normalized level. This is a consequence of the recovery of the hydro conditions, as reservoirs have almost reached the average level of the last 10 years. It is important to highlight that the hydro system production in Spain has increased 34% and that wind output has risen 22%, which amounts to beating production records 7.7 TWh . While the Spanish system reservoirs have reached 98% of the average capacity, Endesa's reservoirs are at 97% of the average capacity. It is remarkable that Ebro and Northwest Hydrological Basin, also managed by Endesa, have reached levels of around 111% and 115%, respectively.
Subsequently, with this weather condition, in the first three months of the year, our hydro production has increased 35% to 2 TWh, whereas our expectations for the full year are now to reach output levels close to 7 TWh , almost aligned with our average hydro production and slightly ahead of the business plan. Now, on slide seven, we can see that Endesa's output decreased 2%, aligned to the reduction in the thermal gap in the period. Regarding electricity sales, despite that overall they remain in line with last year, the mix has improved with the increase in B2C sales and the transfer of clients from regulated to liberalized market, together with a slight reduction in B2B sales as a consequence of our value-based strategy management targeting and retaining high-value customers.
As of today, we have already hit 100% of our 2018 estimated output at an average all-in price of EUR 65 per MWh . As far as the year 2019 is concerned, we have hit around 42% of our estimated output at an average all-in price of around EUR 71 per MWh. Let me highlight that this price reference corresponds mainly to low-voltage customers. Therefore, prices will gradually normalize along the year, converging to 2018 levels. Moving to slide number eight, let me go through the main factor explaining the evolution of the unitary electricity margin. Electricity sales in the liberalized business decreased by 1% in terms of volumes. As a consequence of the positive hydro conditions and lower pool prices, the mix used to cover our sales commitment has been slightly different from last year.
In this context, energy purchases increased by 4% when compared to the first quarter of 2017 to 5.9 TWh , while mainland output decreased by 3% or around 0.5 TWh , mainly due to a narrower thermal gap and the stoppage of Vandellòs Nuclear Plant that was partially compensated by higher load factors in our hydro and wind plants. The unitary integrated margin in the electricity business has shown a positive evolution, increasing at 20% to 24.5 EUR per MWh , benefiting mainly from a higher unitary revenue, plus 3.9% to 64.3 EUR per MWh , and a positive contribution of the short position following a different hedging strategy carried out for 2018. This unitary margin will convert to 22 EUR per MWh along the year, as announced in our business plan presentation.
Also, it is worth mentioning that the current level of supply margin above EUR 7 per MWh in the liberalized market has been better than last year, aligned to the margin expected in our business plan. Regarding the next slide, slide number nine, regarding the gas business, it is worth highlighting the recovery of market conditions that has translated into an improvement of the gas margin in particular. Sales have increased 4%, mainly due to the wholesale business that has doubled the gigawatt hour sold based on the increase of global LNG demand.
Likewise, the number of customers has slightly risen by 1%. As a result of this better scenario, our ordinary unitary margin has increased 50% to around EUR 0.9 per MWh. The increase of sales, jointly with a higher unitary margin, has led to an improvement of the gas gross margin, as we will see later. Now I will hand over to Luca.
Thank you, Pepe. Good morning, ladies and gentlemen. Before diving into the gross margin evolution, let me thank Paolo Bondi for his outstanding contribution to Endesa in the last nine years as a CFO and wish him all the best for his new role as Head of Thermal Generation. Focusing on the gross margin, as seen before, Endesa has reached EUR 1 billion 450 million, 14% more than first quarter 2017. First quarter 2018 gross margin has been EUR 1 billion 450 million, + 12% compared to first quarter 2017 ex non-recurrent impacts related to the mark-to-market and others in gas and previous settlements in non-mainland. The improvement in gross margin is mainly driven by the generation and supply business. As mentioned before, higher unitary margins in electricity and the recovery in the gas business have driven these operating results.
Moving to slide number 11, when it comes to the regulated business, adjusted gross margins improved by 3% as distribution revenues already recognize the revenue increase awarded by the draft ministerial order published in December last year. On the contrary, the non-mainland generation gross margin fall is explained by the absence of the +EUR 21 million of one-offs booked in first quarter 2017. Additionally, it must be stressed that the regulated business contributed to around 54% of Endesa's total gross margin, and finally, I would like to point out that we have attained 94.5% of smart meter deployment and plan to reach almost full completion of the program by the end of this year. Moving now to slide number 12, gross margin in the liberalized business reached EUR 637 million , or + 26% boost year- on- year compared to the adjusted first quarter 2017 figure.
The recovery of adverse market conditions since last year has led to an improvement of the integrated unitary margin backed by better unitary revenues and the contribution of the short position, which improves nearly EUR 50 million quarter- on- quarter. When it comes to the gas business, gross margin amounted to EUR 54 million , EUR 30 million higher than the current margin booked in the first quarter 2017. As commented before, the increase of wholesale activity, better procurement costs on some of our Brent indexed contracts, the better unitary margin backed by high demand have been the main drivers of the gas margin recovery. Note that we estimate both gas demand and distribution market to show a more moderate growth rate in the following quarters.
And finally, I would like to highlight the increasing contribution of Enel X business line with 34% growth at gross margin level compared with last year, aligned to business plan expectation. Moving to slide number 13, a few details on the evolution of fixed cost. Total reported fixed cost reached EUR 535 million, basically flat versus last year. For a better understanding on comparable terms, I would like to refer to the like-for-like fixed cost evolution. Adjusted figures exclude mainly the update of the provision for obligation related to the ongoing workforce restructuring plans and voluntary departure agreements, as well as other O&M non-recurrent costs booked in both years. On a like-for-like basis, fixed costs would have decreased by 4% on comparable terms, mainly driven by several efficiency initiatives implemented in recent years targeting a recurrent reduction in our fixed cost base.
This includes notably the positive effect on personnel cost of 2.3% reduction on the average headcount in the period. Moving on to slide number 14 on EBITDA evolution. When it comes to the adjusted EBITDA split by business line, and by the way, a summary of all the already mentioned effects, it must be noted that 21% increase is mainly driven by the good performance of the liberalized business. In this sense, adjusted generation and supply EBITDA rose by 64% to EUR 319 million . Distribution EBITDA in adjusted terms increased by 6% to EUR 481 million. Finally, non-mainland generation EBITDA reached EUR 80 million , almost flat compared to last year in the same period. Moving now on slide 15 on the P&L evolution from EBITDA to net attributable income.
Starting from the EUR 880 million EBITDA figure, D&A increased by 3% to EUR 372 million, mainly due to the effect of the first adoption of IFRS 15. Net financial results remained flat as the lower cost of debt was offset by a higher average gross debt, while associates and other items only deteriorated slightly in absolute terms. Income tax expenses increased to EUR 110 million and represent an effective tax rate of 22.7% versus 20.5% on the same period of last year, which was positively affected by tax deduction. As a result, net attributable income has increased by a remarkable 47% in the period. Moving to slide 16 on the evolution of the net financial debt. Starting from the EUR 5 billion at the end of 2017, cash flow from operations was + EUR 24 million.
As previously mentioned, this low figure is due to an exceptional swing in working capital due to the combination of several factors already anticipated in our full year results presentation. Notably, by the combined effect of certain tax deferral, a delay in accounts receivable collection due to the seasonality, the different number of regulatory settlements booked in both periods, as well as the negative impact of lower payables for energy and gas. Working capital evolution will revert, and cash flow will converge towards a normalized level during the rest of the year. On the other end, cash outflow related to CapEx and other minor items amounted to EUR 342 million. Finally, Endesa paid more than EUR 740 million in dividends corresponding to the interim dividend against 2017 results in the amount of EUR 0.70 per share.
The results of the above-mentioned effects led to a net debt at the end of the period of just above EUR 6 billion with a leverage of 1.6x . Moving to slide 17, as of the end of the first quarter, gross debt increased to EUR 6.3 billion with an average lifespan of 5.5 years and an average cost of 2.1, which implies a significant reduction versus the 2.4 reported at the end of the first quarter 2017. When it comes to the mix by interest rates and currency, 57% of the company gross financial debt accrued interest at fixed rates, while the remaining 43% accrued interest at floating rates, while 100% of the company gross financial debt was denominated in euros.
Finally, Endesa liquidity amounts to EUR 3 billion, sufficient to meet debt repayments in the coming 26 months. Let me now hand over to Pepe for some final remarks.
Okay, thank you, Luca. Now I would like to conclude this with some final comments on Endesa's performance during this first quarter. First of all, I want to highlight once again the outstanding performance of the liberalized business based on the proven flexibility and resilience of our integrated energy management strategy that has been the key success factor of the 25% increase in reported EBITDA. The important contribution of the continuous effort on fixed cost containment across all business lines, all of the above, has led to ensure strong net income figures which represents almost a 50% increase quarter- on- quarter.
Furthermore, as we stated before, we believe that the final result of the expert commission report confirms the adequacy of Endesa's vision to successfully overcome the risks and challenges the energy sector will have to face to achieve the decarbonization target. Lastly, this set of results makes us feel confident to meet 2018 announced guidance. Ladies and gentlemen, that concludes our first quarter 2018 results presentation. Thank you very much for your kind attention, and let's take some questions.
Thank you, Pepe and Luca. Now we are open to answer any question you may have.
Ladies and gentlemen on the phone lines, that's star followed by one to ask a question. If you change your mind, please press star followed by two. And when preparing to ask your question, please ensure your phone is unmuted locally.
The first question comes from Alberto Gandolfi from Goldman Sachs. Please, Alberto, go ahead.
Thank you, Mar. And good morning, everyone, and welcome to Luca. I have a few questions, if I may, and thanks for taking them. The first one is a little bit of a bigger picture on the Spanish energy mix. I mean, the expert report has been praised by pretty much every company I've heard, but it's basically suggesting a major reduction in the thermal gap. And on the calculations we have done, it probably implies that nuclear doesn't really belong into the mix because if you go for 47 GW of solar by 2030, during spring and summer daytime, solar will be largely covering the demand, particularly weekends when demand is very low. So how do you see really this evolving? And are you worried about this rise in corporate PPAs? I think we calculated about a gigawatt of corporate PPAs assigned just in the past two months.
The second question, I was noticing that you lost about 50,000 customers during the first quarter. Now, in absolute terms, this is not a big number, but if I were to annualize the figure, it would be like -2%. So my question would be, who do you lose it to? Is it traditional competitors or is it new entrants with no balance sheets, a bit what we have seen in the U.K.? Then I have. These are my two main questions, but if you have time and will, if I'm not taking too much time out from other questions, there's one thing I don't understand.
I mean, the Deloitte report talked about low tariffs versus the rest of Europe, but yet the regulator put out a different report where they say that in regulated activities, you make more, well, you and the industry make more than 8% return because you've never been clawed back any outperformance. So I was wondering, how do we reconcile these discordant views? Very last would be, there has been a bit of a debate about the appropriate size of nuclear provisions. And could you maybe say this number in the press talked about EUR 11 billion liabilities estimated by ENRESA? I know you contribute to it every year, and if you have life extension, perhaps the funding gap is not going to be huge.
But do you think this EUR 11 billion is appropriate, or is there a risk that through a sort of international benchmarking, one day we wake up and suddenly these provisions may be revised? Maybe you can elaborate even on the legal process. Is that even possible in the next few years? Thank you.
Okay, thank you, Alberto. We have a lot of questions. I will try as to answer this question. The first one in relation with the Spanish energy mix and the evolution, you're right. First of all, I should say that in the first quarter, what we have seen is a reduction in the thermal gap that is clear. But on the other hand, what we have seen is an increase in the commodity prices, especially, as you know, in the CO2, but not only, also in the gas prices, also in the Brent prices.
A little decrease, I think, in the coal prices, but with the CO2, the total barrel cost of these power plants are higher than expected. The two things combined give us a higher price than the ones that we forecasted in our Capital Markets Day presentation. We think that in the future, nuclear will continue because it is not a question of the security of supply today, which, as you know perfectly, there is no any problem today. But we should see the horizon of the year 2030 in which, without these nuclear power plants, it would be impossible to fulfill the demand. We need this thermal capacity, and as you know, well, I think that there is no alternative to the nuclear technology because of the security of supply, but also because it gives a competitive price, and also if we want to comply with the emission reduction target.
In relation with what you have mentioned about the PPAs in the renewables, of course, first of all, I should say that renewables for sure will be one of the main areas of infrastructure growth in the next, let's say, 10 to 15 years. This new capacity will come from options, merchant, and PPAs. In our opinion, PPAs will have an important development in the future given the already competitiveness of the renewable prices and the growing interest of some clients to be supplied by renewables generation. So we will see this kind of development in the future for sure. However, this type of PPAs contract are not simple for both the generator and the customer. You have to adapt the supply to the consumption profile of the customer for a period of 5 to 10 years.
Nevertheless, we have through Enel Green Power great experience in this type of PPAs contract and a very important flexibility throughout our generation portfolio. All in all, what we think is that, trying to summarize, that we are not worried about the thermal gap evolution. It's going to be lower, mainly, yes, because of the renewable growth. Nuclear will continue in the mix. There is no alternative for that. And we will see a great development of this kind of contract of PPAs contract. In relation with your second question about the customer loss, the 50,000 customer loss, let me say that being the leader in terms of market share in the market, it is obvious that we are reducing and we will reduce our customer base. Our focus today is, well, of course, to take care about this reduction. That is very clear.
But taking into account that we will reduce our customer base, what we are focused on is in the value of this customer base that is very important for us. What we are focusing on is in the retention of these customers, trying to improve the customer experience and all these kinds of things, and being absolutely honest, I should say that we are increasing margins. We are increasing the life of the customer in our customer base, and we are trying to offer better services and experience to our customers, so at the end of the day, I should say that we are not worried about this reduction. Let me say what it is clear for me and is one of the key parameters that I used to or I try to follow is the churn. We are reducing the churn of the customer.
In relation with the Deloitte report, well, the level of the tariff and the returns that we have today, the two things are true. First of all, we have the lowest tariff if you take into account the real cost of supply of electricity, but the higher tariff if you take into account all the taxes and all the charges that the tariff covers. So that is the reason why we said that there is room just to reduce the tariff, and there is room also to improve the remuneration of the utilities. The second thing is that you have said that we have a return of 8%. Let me say, you are right, but what do you think about the 8% rate of return? It is high or it is low? We think that it depends on the risk of the business.
It is also a consequence of the way in which we are doing things, trying to reduce costs, trying to be more efficient day by day, and trying to do things in the right way. So it is compatible for me just to have a very low level of tariff and also to have this level of return. In relation with the nuclear debate with the provisions, let me say that what we have seen is that, of course, there is a deficit if we think the nuclear power plants are going to be shut down when they reach the 40 years old. But it is if the regulator doesn't increase the ENRESA tax. But also it is true that with 50 years' lifespan, there is no any deficit.
If you take into account that we think that there is no alternative for the nuclear power plants, that we think that we will extend the life of the nuclear power plants, we are not going to have this deficit. On the other hand, you ask if it could be changed this number of deficit. I think that the way in which ENRESA has calculated this figure is very conservative. If you ask me today, I would say that this deficit will be lower than the one that we are expecting now.
Thank you, Alberto. We have now Harry Wyburd from Bank of America Merrill Lynch.
Hi, good morning, everybody. A couple of questions from me, please, both on the gas business. Firstly, your Cheniere gas contract, the Corpus Christi Train 1 contract, should be coming online in the first half of next year.
It's a pretty sizable contract. So can you talk a bit about how you're going to use those volumes? Gas Natural mentioned on their conference call that their Cheniere contract, which has a slightly lower tolling fee, is now in the money. So is your contract in the money, and are you going to use those contract volumes to displace other procurement contracts which are rolling off, or is that going to represent new volumes for you which could potentially be profitable? And then secondly, again on gas, Enel mentioned on one of their recent conference calls that there had been some kind of a reset in the way that gas is accounted for in Iberia. So I wondered if you could comment on that. How has that changed things for you?
Has that been one of the reasons why you've reported a positive movement in gas this quarter after lots of quarters of negative moves? And then perhaps just to round off, just more generally, in your guidance, what are you assuming on gas in terms of volumes and margins? And given the significant increase in international gas prices, are we ahead of what you'd been assuming in your guidance? Thank you.
Okay, and thank you for your question. The first thing that you have asked is if the Cheniere contract is in the money. I think so. I think so. And more important than that, it will be one of the main value drivers of the gas margins in the future, for sure. So we are very comfortable with the contract.
It is true also that, well, the last year we have a very strange context in the gas market. And as we said, we think that the full recovery of the gas market outlook will be in the year 2021, 2022. So we are not in a, let's say, normalized gas market context. Having said that, the Henry Hub index is lower than 3, improving a lot compared with the last year. That means that today we could think that this contract is in the money and it is profitable. You should take into account also that these kinds of contracts are free for deviation, for selling in other countries.
Well, what we have seen, and we think that we will see in the future, is this evolution of mainly the Asian and Latin American market that will give a lot of value to this contract. I will pass the next question.
Yeah. On the reset, as far as accounting, yes, we account now gas margin on a formula which is a TTF plus a spread. That's why, obviously, we have no issues, let's say, this year as was mentioned, as you said in the last Enel's results call. However, the performance in the gas business, as I read it, is driven by actually better market conditions as far as this year. As far as the outlook for the rest of the year, obviously, we have benefited from increasing volumes, increasing margins for this period, but also increasing deviations for some LNG, which we expect this, let's say, to be of a lesser contributor to the rest of the year. As far as the guidance, we had a guidance of EUR 50 million of gross margin for the year.
As far as gas, it will be a little bit higher than that in the range of EUR 100 million. However, for the overall guidance, we have some negatives which were, I would say, different from last presentation of full year results in the sense that, obviously, hydro production, which is better, is basically, I would say, netted by the outage of the Vandellòs Nuclear Plant, which will be, let's say, out of production until July, mid-July this year. And also on CDS performance, obviously, spreads are very tight at the moment, so we expect a lower contribution from that. So overall, guidance remains the same, but with a different mix and higher contribution from gas.
Okay. Thank you.
Thank you, Harry. Next question comes from Enrico Bartoli from MainFirst.
First of all, I'd like to go back to the nuclear situation. Actually, the press reported that the government is considering in some way to move the decision to keep the nuclear plants open to the government from the companies. Could you give us some comment on this and, in general, an update on the discussions that you may have with the government and the political situation in terms of acceptance of the possible increase of the useful life of the nuclear plants? Second question is regarding the operating cash flow in the quarter. You provided some comments. Could you provide us some more details, actually, on this movement of working capital that has compressed the cash flow generation in the first quarter and on what to expect for the next quarters, and in particular on the evolution of the regulatory receivables, the amount and the end of the first quarter and the possible evolution over the next quarters?
Then finally, I have a question regarding the fuel prices that we see in the market for the second half of the year. Actually, they are close to EUR 60 per MWh, and you were mentioning that the other situation has been normalizing. So I was wondering if the fuel prices are discounting some different scenario and you expect them to go down in the second part of the year, or there are other impacts like you mentioned, probably the CO2 price or the gas price that is priced in by the current forward? Thank you.
Okay. Thank you, Enrico. Regarding the nuclear discussion, well, first of all, let me say again that in our opinion, there is no alternative to the nuclear technology because of the security supply, the prices, and also the emission reduction target.
Having said that, I would like to say that nuclear is a positive free cash flow generation asset. Also, but having said that, the profitability is not very high. It's, in my opinion, very low. You should take into account that nuclear power plants' cash out is higher than EUR 40-EUR 41 per MWh. And on top of that, the variable costs, roughly EUR 24 per MWh, 50% of these variable costs are taxes. That is EUR 12 per MWh or EUR 100 million per group of 1,000 MW. So taking into account these two things, what it is important for us is to think in the future, continuing with the operation of the nuclear power plants, but trying to improve this profitability.
There is no problem, in my opinion, in the next two, three, four years, and also in the next decade, but we need to have higher prices than these EUR 41, EUR 42, and if you take into account that the extension life should be something, the cost should be something of around EUR 1 per MWh, more or less, that means that, in our opinion, there is no reason to try to improve this profitability in the future by means of better tax charges in these nuclear power plants, and now, Luca.
Yeah. On the evolution of working capital, as I said before, I mean, we had obviously a cash flow from operation of EUR 24 million for negative working capital evolution in the quarter, mainly through four items which I will detail.
So there is a seasonal effect in the billing process which accounts for just more than -EUR 100 million . Then we have higher regulatory working capital due to delay in settlements, which is about just shy of EUR 100 million . Then we had taxes, VAT payment deferral for about EUR 100 million and higher payment to suppliers related to commodities for both coal and gas purchases for more than EUR 200 million that affected the quarter. However, as I said, cash flow from operation throughout the year we revert and we expect to have EUR 2 billion guidance as far as year-end on these topics. And then as far as amount of receivables in the first quarter were EUR 640 million , and we expect a similar amount for the rest of the year.
And next question comes from Javier Garrido from JP Morgan.
Yeah. Good morning. A couple of questions, if I may. The first one is on your guidance for the year. If I understood correctly, you are talking about lower realized margins in the liberalized business versus the EUR 24.5 per MWh you achieve in Q1. And I understand that you have the Vandellòs outage, but if I am correct, that outage started in March. So can you explain why there should be a decline in the unitary margin when you are talking of EUR 65 per MWh realized prices and when we have seen the day-ahead prices, the spot prices lower than in Q1? What is the driver of the decline in unitary margins versus your margin achieved in Q1? And then the second question is your guidance for 2018. Overall, EUR 3.4 billion of EBITDA.
Do you think that this guidance is now minimum, or do you still think that there is some risk to achieving this guidance overall for the group? Is there anything beyond the liberalized business where we should expect a negative development throughout the rest of the year? Thank you.
Okay. Okay, Javier. Let me say, first of all, that you're right. During the year, many things happen, and some of our assumptions change and some improve, and others are worse than we thought before or we forecasted. You're right in the sense that there are the case of the unexpected outage of Vandellòs that, let me say, will last up to July 20, more or less, will really impact in our accounts. But on the other hand, we have better outlook in the gas market, hydro output improvement, and other things. So we will manage all these situations.
We think that we are confident in the guidance for the full year. Having said that, the unitary margin, integrated margin that we've got in the first quarter, the margin is very high, and we expect yet to obtain the one that we announced in our business plan. That is something around EUR 22 per MWh. Something will go above and some things will go against. At the end of the year, we feel comfortable with this figure that we have here. In any case, we are in the first quarter. It is very early. If you remember what happened in the last year during the first quarter, that no one of you thinks that we will be able to reach our guidance. We said in that occasion that we think we had some levers just to manage the situation.
Today, we feel a lot more comfortable than one year than in the first quarter of 2017, and then I should, and I want to stress that we feel comfortable with our guidance, but we will see what happens during the year. Luca.
Yeah. Just to be more specific, I mean, as far as generation, as Pepe pointed out, we expect basically a better hydro output for about 2 TWh in the year vis-à-vis last year. However, the Vandellòs outage is about 1.6 TWh of less energy until mid-July. So that basically is netted, and then we have, as I said before, let's say no contribution, let's say less contribution from both the clean gas spreads as well as ancillary services in the year as far as now. But as I mentioned before, gas margin is actually higher.
So at the moment, we feel comfortable with the guidance of 3.4, and we'll see accordingly how this develops during the year.
Thank you, Javier. We have now Javier Suárez from Mediobanca.
Hi. Good morning to everyone. Three questions left on my side. One is on the cost cutting. The adjusted fixed costs of the company are down -4%. If you can again clarify from where this cost cutting is coming from and what we should expect by the year-end? Then second question is on the contribution from Enel X. I have noticed that there is a small but nice contribution from Enel X, and I was wondering if you can clarify from where that is coming from? And finally, in light of what you have been highlighting on the electricity market, on the generation market, if you can give us an update on your hedging strategy for 2018 and 2019? Many thanks.
Thanks, Javier. This is Luca. As far as the cost cutting, 4% down. Main contributor has been personnel costs at least for the quarter. Obviously, all business lines are contributing as of now. We will have, let's say, meeting our guidance, which is just north of EUR 2 billion for fixed costs for the full year of 2018. So I would say no major changes according to what has been already disclosed in the business plan. All indicators, the KPIs for the four business lines are basically well on track. Then moving to Enel X, the contribution is mainly in the home services, basically segment within Enel X, which is contributing about EUR 22 million of gross margin within the quarter. And obviously, this is progressing well. As we know, we started reporting Enel X starting from this quarter. So we expect to meet budget also there for the full year.
Finally, as far as hedging, as mentioned before by Pepe, we have 40% hedge for 2019 at 71. Obviously, that's only for low voltage. So we expect obviously the price when we hedge the rest to go lower. The hedging strategy overall has a bit changed during the year because obviously the OTC market has lower prices. So we're buying more in the OTC market vis-à-vis last year. What we do expect for the remaining of 2019, obviously we would see how commodities will move and hedge accordingly, but 40% in the quarter for the 2019. As of now, I think it's already a comfortable position.
Many thanks.
Thank you.
Next question comes from Rui Dias from UBS.
Thank you, Mar. Good morning, everyone. Just a couple of questions from me. The first one is on electricity demands.
I noticed that demand from industry and services in your area have dropped relative to last year. So I just wanted to ask if you could give us some detail on what is driving this. And then just to go back to gas supply very quickly, as I recall, the second half of last year was extremely weak. And this was driven by increasing gas imports and competition in Spain. And I think that this start being noticed, or the first signs were visible already in Q2. So we are already in Q2 as well. And so I just wanted to check with you how these dynamics are evolving this year in gas supply. This is all. Thank you.
I will answer the second question, and Luca will answer the first one. In relation with the gas market, the first thing that I have said is that we have seen a huge improvement in the gas market outlook, mainly because of the global LNG demand recovery, also because of our higher competitiveness of our portfolio versus the different Hub indexes and the TTF with the current Brent prices. That means that we think we will maintain at least the level of margins that we've got during the first quarter, more or less. If you ask me in our guidance for the gas margin in the Capital Markets Day, we said something around 50 could be at the end of the year doubled and this EUR 50 million . Nevertheless, gas market full normalization, as I have said before, is not expected before the year 2021 or 2022.
So we will see what happens, but we are again comfortable with the gas market outlook that we have today.
And then as far as demand and sales for the B2B, so the industry customers in our areas, there's been basically a reduction in B2B sales, mainly expected by some closure of industrial clients in the chemical business, which affected, I would say, demand for more than 100 GW in terms of energy. So it's very specific to specific clients.
Thank you.
Thank you. Next question comes from Anna Maria Scaglia from Morgan Stanley.
Hey, good morning, everyone. Just two quick questions, if I may. The first one was regarding your debt mix. I was noting you still have got quite a lot of exposure to floating debt, and I was wondering if there is any plan to change that, why not to improve, sorry, to increase the fixed portion of the debt to take advantage of the current very low rate. The second question is regarding CO2, and if you can tell us a bit about your view about the high CO2 prices at the moment, how you are positioned, what's the risk for you going forward, or lack of risk eventually. Thank you.
Anna Maria will answer the second question, and then Luca will answer the first one. With regard to the CO2 price, first of all, I should say that the current price is higher than the one that we forecasted in our, again, Capital Markets Day. In our opinion, the market remains structurally oversupplied.
However, it is true that the CO2 market seems to be going to increase or to be involved in, in my opinion, a speculative wave. Could be just because of the compliance reasons. You should take into account that April is the month in which all the companies should fulfill this compliance. Also could be because of the cold weather that we have had, well, what we think is that, yes, because it's something speculative, it is very difficult to maintain this level. In any case, rising CO2 prices has a positive impact for Endesa. So we're very happy of these prices. All in all, I think that we will see what happens, but we will enjoy this situation for the next month.
And on the mix of our gross debt, I mean, we currently have, as pointed out, 43% of floating and fixed at 57%. Bear in mind, Anna Maria, that we access market only on the short-term side with the CP paper market and through bank loans. And therefore, at the moment, we don't see, let's say, any need to switch or to change the mix because we wouldn't see any improvement in terms of the cost reduction as for now. So 2.1% of cost of debt for the first quarter, and I think we can definitely have a good evolution as far as cost of debt with this mix throughout the year.
Thank you, Anna Maria. Now we will answer one question received by email. It comes from Antonella Bianchessi from Citi, and she is asking about the coal generation fleet, how much CapEx we are devoting during this 2018, and if we can update about the closure prospect timing. Thank you.
As far as CapEx, I'll answer the question. We have about EUR 90 million for the full year, of which about just shy of EUR 80 million is for maintenance and about EUR 12 million is for growth. As far as the closing procedures, I will hand it over to Pepe.
Okay. Well, you know our position in this issue. What we have said always is that under current conditions, the refurbishment to adapt domestic coal power plants to the required IED or BREF investment are uneconomical unless capacity payments are put in place. I have said that the government is the one that set the energy policy, and we have very clear this. What we think is that the domestic coal closure is denied, the owners must be adequately compensated. Today, the only reason why it could be blocked, shut down, is the security of supply.
In the future, could be just because of the new law proposal, could be for two other reasons. One is if it impacts in the prices or competition, and the other is if it jeopardizes the achievement of CO2 emission target. We think that in the current market conditions and under the current regulation, it has no sense to continue with the domestic coal power plants. So domestic coal power plants will close, in my opinion, by June 2020 if nothing changes.
Thank you very much. At this stage, there are no more questions. So just let me remind you that the IR team is available to any further questions you may have. Have a nice day.