Good morning, ladies and gentlemen, and a warm welcome to our 2020-2022 Strategic Plan. As you can see in the agenda, we will start with our CEO, José Bogas, who will guide us through Endesa's current positioning and our vision of the energy sector trends driving our strategy. Then, our CFO, Luca Passa, will share with us an updated view of the main financial figures of the plan. After some closing remarks, we will then open the Q&A session to those connected on the call and on the web. As a reminder, media will be able to listen to both the presentation and the Q&A. Thank you, and now I will turn over to José Bogas.
Thank you, Mar, and good morning, ladies and gentlemen, and thank you for joining us today. Our opening slide shows a picture of Endesa's today. In recent years, Endesa has further consolidated its position as the Iberian market leading player, while at the same time, it has progressed in its commitment towards a cleaner, more sustainable, and efficient business model. We are the first market player in network in Spain with 117 TWh of distributed net energy in 2019. We manage a well-diversified network with more than 12 million supply points, which incorporates leading-edge smart meter devices. We are the largest operator of power generation with close to 20% market share supported by new renewable capacity. In the Supply business, we are also the first operator in power sales with around 99 TWh.
We manage the largest customer base in Iberia with a total of 12.3 million customers, a competitive edge as retail activities are and will become even more strategically relevant. These figures are the result of a prospective strategic vision and the delivery thereof, allowing us to be ready for the sector challenges and opportunities ahead. Our integrated model is a clear advantage, allowing us to accelerate capturing growth opportunities and preserve value creation from the energy transition looking forward. Moving to slide number five, let me now take you through the delivery of the main operating target contained in the strategic plan released last year. Our strategic repositioning towards renewables has resulted in a significant change of our portfolio mix, which by the end of 2019 will be 58% of CO2-free output ahead of the goal set for 2021.
Our strategy oriented to customer value creation has also delivered solid results. Electricity integrated margin is expected to reach EUR 26 per MWh for the whole year, with a 1.5% growth in sales to liberalized customers compared to last year. Endesa's home clients will stand at 2.2 million by year-end, progressing towards target. Finally, on digitalisation, as key enabler of our strategy across all mainstream businesses, as of end 2019, we will have executed more than half of the total EUR 1.3 billion set for the 2019-2021 timeframe, about EUR 0.7 billion accumulated. In summary, we are delivering sound operating progress on our strategic pillars. On slide number six, we show the expected financial performance in 2019 and how our financials have moved since 2014. All figures show a remarkable progress, accomplishing, and sometimes exceeding the target that we have set in our business plans.
Our CapEx has more than doubled, focused on renewables and networks, in line with the energy transition long-term goals. At the end of 2019, EBITDA is set to reach EUR 3.7 billion, increasing at a 4% annual compounded rate, thanks to CapEx-driven industrial growth and to the efficiency programs we have more than successfully delivered since 2014. Net ordinary income evolution is a clear example of a successful and a well-planned strategy, with a sound 11% cumulated annual growth. In this sense, the ratio net ordinary income versus EBITDA improves from 25% to 41%. Based on a DPS growth of 13% in cumulated annual terms, Endesa has provided its shareholders with one of the most attractive returns in the sector, more than a 148% total shareholder return after our 2014 secondary share offering, which compares very favorably with the main stock market indices.
Such performance has been also accompanied by a growing interest of socially responsible investors, reaching 11.2% of our total shareholding as of December 2018. Slide number seven shows our long-standing commitment with the decarbonization process, and a clear example of the deep strategic repositioning already undertaking compares favorably with the evolution of our generation CapEx. Unlike the strategic plan released in October 2014 that only allocated 13% to renewables, representing mainly the hydro CapEx maintenance, today we are devoting almost 70%. By the end of this year, generation CapEx will have exceeded EUR 1.2 billion, almost four times the level of 2014. In only five years, we have repositioned our company towards a materially cleaner generation mix.
As you can see on the right side of the slide, our current installed capacity shows this year versus 2014, with 7.4 GW of renewables, almost 40% of the total versus 28% five years ago. In slide number eight, accompanying this renewable development, three main platforms have enabled us to navigate through the energy transition, namely networks, customers, and services. Networks require digitalisation and automation to manage an increasing share of renewables, the development of the electric vehicle, and more complex client needs. With that aim, we have increased by 25% net CapEx allocated to networks in the last five years, including the deployment in 2018 of our smart meter program with around 12 million devices in place. The strong focus we have set on efficiencies has resulted in a 27% decline in OpEx per end user, expected to be at EUR 43 per end user by year-end.
The value of such a digital transformation will be fully appreciated when the demand electrification process is more advanced, and we will be able then to meet future customer needs. In this context, Endesa X, our service division, continues to adapt itself to the new competitive environment with the aim of helping our customers to facilitate electrification to reduce their costs in the decarbonization process and offering flexible solutions. Customers are essential in our strategy. We have increased our free clients' market by 1.4 million since 2014. This has allowed us to reach an expected unitary integrated margin for 2019 of EUR 26 per MWh, that is EUR 7 higher than 2014 figure. Finally, on services, e-Home clients are expected to reach 2.2 million in 2019, an increase of 70%.
As a final metric, in less than one year, we have already successfully installed 5,000 electric vehicle charging points under the Endesa X business model. Our vision, and now on slide number 10, in order to continue consolidating our position in Iberia and capturing growth opportunities, we must focus on the main sector trends that will shape our CapEx allocation going forward, that is decarbonization and electrification. Climate change is a reality we cannot ignore and should be fought by means of development of renewable capacity, greater energy efficiency, and circular economy. We foresee a growing need of electricity as it is the cleanest source of energy. Therefore, we must be able to deal with distributed generation and final demand increase required by smart cities development. To this end, the necessary electrical infrastructure and the most advanced energy ecosystem and platform will be key enabling pillars.
As a summary, the 2020-2022 strategic plan confirms the strategic mission set out in our previous plan, which focused on creating long-term sustainable value for all our shareholders. On this slide number 11, I want to comment on the new energy paradigm arising from the target agreed at the Paris Climate Change Summit back in 2015 that resulted in the most ambitious international commitment to date in the fight against climate change. At that summit, the participants agreed as the ultimate goal that by 2100, the Earth's temperature could not increase above two degrees Celsius with respect to pre-industrial levels. Renewables and energy efficiency will represent the cornerstone of all measures to tackle climate change issues.
We are very pleased to host the United Nations Climate Change Summit, COP25, here in Madrid, very close to our headquarters, which will take place in December, and where, as a testimony of our commitment, we will participate as diamond sponsors. On slide number 12, the environmental target set by the European Union and its member countries accelerates the path towards the energy future model. Currently, the 2030 goal for the European Union requires the reduction of the overall emissions by 40% with regard to 1990. The equivalence of these targets for Spain are still pending formal approval, but the likely result will be an emission target reduction of 21% with respect to 1990 or 48% versus 2005. This implies a reduction of 1/3 of the current emissions. As for the renewables final energy consumption target, the Integrated National Energy and Climate Plan increased it up to 42%.
This requires around 65 GW of new installed capacity before 2030 in order to achieve 74% of renewables regarding power generation. And finally, concerning the energy efficiency target, Spain will have to reduce its energy consumption by almost 40% with respect to the agreed business as usual with the trend scenario. All of the above will render huge investment opportunities for the 2021-2030 horizon in Spain, estimated at about EUR 240 billion for the system. Within this profoundly changing scenario, Endesa is ready to play a leading role. And now on slide number 13, our main priority is to accelerate our transformation, reducing CO2 emission of our generation portfolio and boosting renewable generation, thus promoting a sustainable transition. As we announced last September, we have decided to accelerate our coal phase-out over the planned period and beyond.
In that sense, we plan to discontinue all mainland coal power plants by 2021. This will imply a reduction of the estimated coal production by close to 100%, keeping only two coal groups in operation on the island pending closure before 2030. The mainland coal-fired power plants phase-out will be accompanied by an ambitious conversion plan allowing for a just transition in the affected communities and the valorization of existing assets and connections. As can be seen, the decarbonization process of Endesa's generation mix receives a definitive boost with this industrial plan, targeting a complete coal phase-out well before 2030. Moving to slide 14, this coal phase-out will go together with a sharp acceleration of renewable capacity deployment.
By 2019 year-end, we will reach a total renewable capacity of 7.4 GW, including the 900 MW awarded in the 2017 auction, which will be operative at the end of this year, 720 MW already connected to the grid. We are ready to build additional capacity of 2.8 GW by 2022, driving renewable capacity to a total number of 10.2 GW at the estimated output to double from 9 TWh in 2019 to 18 TWh in 2022. This additional renewable energy, more than 8 TWh, along with higher CCGT load factor, plus 0.6 TWh, will more than offset lower production from conventional thermal sources. The shift in the generation mix will enable our emission-free output to reach approximately 85% by 2022, with almost 60% of our generation capacity coming from renewable sources.
Provided that such technologies are not exposed to commodities price fluctuation, they will significantly contribute to improve our earnings visibility. As can be seen on slide number 15, we are boosting renewables development as our main growth platform. From the 7.4 GW of total renewable capacity, including the 900 MW awarded in 2017 auctions, we will increase this figure in 2.8 GW, mostly solar and wind, by 2022. Endesa's renewable capacity in 2022 will reach 10.2 GW, with an estimated annual output of nearly 18 TWh, doubling our current renewable generation. The new projects are expected to bring returns with leverage IRR close to 11% on average, which equates to a spread over WACC of more than 200 basis points. We will continue to monitor bolt-on acquisitions as long as they have a strategic fit and are of accurate value, as we have done up to now.
It is worth noting Hydro Technology's important contribution to decarbonization, providing emission-free production and high flexibility. The expected increase in production shown in the graph is driven by an exceptionally dry 2019 and our normalization assumptions throughout the plan. Continuing with renewables on slide number 16, in order to ensure long-term targets, it is now more important than ever to promote our pipeline of renewable projects, which stand now at more than 16 GW up to 2030, out of which 88% is solar. It includes a high proportion of projects with TSO-awarded connection points that guarantees the deployment of the new capacity embedded in this plan. One of our main advantages is that we enjoy a natural hedge with our large and diversified customer base.
As an example, our hedging strategy for new development assumes around 1/3 long-term PPAs with B2B customers for, let's say, 10 years, another third from B2C customers that stay with us for more than five, six years, and the last third to be hedged with the rest of our portfolio, OTC. Such hedging strategies allow us to reach a profitability of more than 200 basis points over WACC. In the same way, Endesa's balance sheet is one of the healthiest in the sector with financial flexibility. Our solid track record and know-how ensures quick and easy access to address the complexities of permitting processes. And finally, belonging to a group which is the world leader in renewable development allows us for a high degree of synergies and scale economies among other benefits. On slide number 17, we show our CO2 emission reduction commitment.
The acceleration in the transformation of our generation mix will enable us to reach approximately a 75% reduction by 2030, comparing very favorably with the intermediate 2020 target and well on track to achieve a fully decarbonized mix before the COP21 deadline of 2050. The specific emission target set for 2030, lower than 140 CO2 g /kWh , represents around 70% reduction compared to 2017 figures. Our levels are aligned with the most ambitious objectives of the Energy Transition Ministry and contribute to the Science Based Targets initiative of the United Nations, which the Enel Group recently joined. This reshaping of our assets will allow us to implement more active policies to incorporate ESG funds to our shareholding. Moving to the enabling infrastructures on slide number 18, as I mentioned before, the energy transition will present disruptions in the way we operate infrastructures.
Network digitalisation must provide adequate answers to new requirements and needs. In that context, the DSO, that is, the distribution system operator, will play a crucial role. It should be recalled that the 2021-2030 National Energy and Climate Plan foresees an investment of EUR 40 billion to boost electrification and networks. This is totally consistent with our vision about the massive investment opportunities next decade is about to bring. Digitalisation, electrification, and decentralization are paving the way for platformization of the energy sector. This will lead to real-time monitoring and management of a large amount of information for optimal operation. Likewise, innovation and resilience will rely on the role of the DSO as a market catalyst as cities and their networks grow and expand. Finally, innovation should also promote a more active customer role.
On slide number 19, we are clearly committed to becoming a best-in-class digital network operator while maintaining continuous focus on operational efficiency. As a matter of fact, we foresee a 3% increase in net distributed power between the baseline year and 2022. The digitalisation initiative aimed at improving asset resilience will contribute to better reliability and quality of service. In particular, we will be able to reduce losses by 3% and interruptions by 19%, while further reducing the OpEx for end users by 9% in three years.
Moving to ecosystem and platform on slide number 20, according to the Spanish National Energy and Climate Plan, the medium-term future of the energy sector will increase the share of power on the final energy consumption derived from the introduction and widespread use of, first, electric vehicles, which are estimated to reach five million in 2030, will be a key contributor to boost transport consumption, which is expected to more than triple from 7 TWh to 24 TWh, as well as the increase of the residential share from the current 38% to 45% in 2030 on total power consumption.
This shift in consumption patterns and the development of new platforms opens the door to new business opportunities, which we aim to build upon under Endesa X business line. With this business plan timeframe, we intend to reach 36,000 charging points, 7x today's present number, and increase e-Home clients to 2.8 million.
On slide number 21, we can see in detail how our new business plan intensifies the commitment of our business model to the Sustainable Development Goals set by the United Nations. Its business line has a direct impact on SDGs 7, 9, and 11, and it impacts the wider scope of SDGs. Concerning SDG number 7, we are targeting a 60% renewable share over total mainland capacity as a result of renewable development acceleration and the coal phase-out. This will be achieved by deploying the lion's share of the EUR 7.7 billion CapEx committed in this plan. On network, SDG number 9, our smart meter fleet will reach more than 12 million devices by 2022. Going forward, 26% of our CapEx will be devoted to Industry, Innovation and Infrastructure. The deployment of 36,000 charging points as of 2022 fits with SDG 11 on Sustainable Cities, where we will invest 9%.
All in all, more than 90% of total CapEx is related to Climate Action, SDG number 13. And now, let me hand over Luca that will go through the details of the strategic plan.
Thank you, Pepe, and good morning, ladies and gentlemen. Navigating the sector trends of decarbonization and electrification through the necessary electrical infrastructure, the most advanced energy ecosystem, this business plan remains focused on creating long-term sustainable value. Thus, let me start with the detail of the CapEx in the plan, comparing it with the previous one both in terms of nature and in terms of business line. It foresees a significant increase in investments with an annual run rate of more than EUR 1.9 billion. This new plan totals EUR 7.7 billion, which is a remarkable 20% increase compared to the figures released last year and more than 50% than our 2017-2020 plan.
The CapEx plan is 62% devoted to asset development with EUR 4.8 billion out of EUR 7.7 billion. As we elaborate later on, this plan is characterized by the strong organic growth in renewable, almost doubling the CapEx versus the previous plan, which will help us to accelerate our decarbonization process, increase investments related to digitalisation, automation, and modernization of our network, paving the way to the electrification of demand. Moving on renewables in slide number 24, to achieve our targets in renewable installed capacity and CO2 emission-free production, we are committing a total cumulative CapEx of around EUR 3.8 billion, which almost doubles the amount of investments of the previous plan, 94% out of which will be devoted to asset development.
This investment will allow us to compensate production reduction from the phase-out of the coal-fired power plants, reduce our CO2 emissions, enhance supply services offer by adapting it to the needs of the new global customers. As a consequence of the acceleration in the new renewable capacity deployment, Enel Green Power gross margin is expected to boost 1.3 x by 2022 compared to 2019. Moving to the electrification on slide 25, we will be focused on consolidating our leadership position in the Enel Green Power business, maintaining our current market share in a competitive environment through a strategy aimed at increasing the value from clients through integrated and customized solutions, focusing on the client experience, new innovative tools in customer care through digital channels and customer self-management, launch of new sales channels strengthening traditional ones, customer loyalty and retention plan based on preventive campaign through advanced analytics.
Our free customer base will increase by 12%, around 700,000 customers. Sales will improve by 4% to 103 TWh, driven by higher volume in B2B and B2C. The effect of this strategy in Supply, alongside with the renewable development, will allow us to consolidate our integrated margin. For 2019, we expect an integrated margin around 26 EUR/MWh that will increase up to around 30 EUR/MWh by 2022, supported by higher renewable in our generation mix and more constructive market conditions. Gross Supply margins are also expected to consolidate from above EUR 9 MWh in 2019 to about 10 EUR/MWh in 2022, supported by the value management and the improvement of the mix of our customers. For 2020, we have already hedged 99% of our estimated output at an average oil-linked price of 74 EUR/MWh.
For 2021, we have hedged 41%, and the reference price is about 75 EUR/MWh. Once we consider our total sales mix in both years, the underlying revenue will converge to levels around 68 EUR/MWh. These hedging levels make us feel confident to achieve the integrated margin goals set in the plan. Moving to slide 26, we aim to consolidate our position as the second gas operator in Spain. During the period of this business plan, we expect the number of gas customers to increase by 6%, reaching a total of approximately 1.8 million customers in 2022. Gas sales are expected to grow by 3% to a total figure of 89 TWh by 2022, mainly driven by CCGTs consumption that is expected to increase substantially as a consequence of the expected higher production in the system.
On the other end, retail sales will slightly decrease to 65 TWh due to the progressive electrification of demand during the coming years. We will seek to extract the maximum value from the flexibility and competitiveness of our gas contracts thanks to the stabilization of market fundamentals. This will allow us to maintain almost flat the unitary margin by around 3 EUR/MWh along the planned period. Now, on efficiency and digitalisation KPIs on slide 27. The digitalisation efforts in the retail area have led to a sound performance across all the main KPIs. The number of contracts we'll be building will increase by 29% during the period of the plan, up to 4.5 million contracts. The proportion of digital sales will climb from the 10% in 2019 to a 14% by 2022.
The number of digital contracts will expand by 6% and will stand at five million at the end of the plan. This sound performance of the digital KPI is driven by several projects and the redesigning of the relations with the customers. Some examples of these projects are a new CRM to manage in an integrated way the cycle of pre-sale, sale, and post-sale, unification of the customer care into a customized model, a new platform for B2B customers to enhance the digital relationship, a new back-office platform to manage the full customer journey digital cycle. The redesign of our internal processes and customer interface will result in relevant efficiencies such as the reduction of the cost to serve, which will drop by 14% to EUR 9.1 per customer compared to 2019. Moving to networks on slide 28.
The current CapEx plan represents an increase of about EUR 200 million versus the old plan, or + 11%, up to EUR 2 billion till 2022, 55% of which, EUR 1.1 billion, will be allocated to asset development, digitizing our grids in order to improve their resiliency and flexibility. I would like to highlight that the bulk of the smart meter implementation plan was carried out already last year. These strong efforts in digitization will allow us to tackle the future challenges coming from the high penetration of renewables, self-consumption, and the introduction of the electric vehicle through automation, big data analytics, and artificial intelligence, and promoting further efficiencies.
Moving on to the margin evolution of our distribution business on slide 29, the higher effort in digitalisation and automation in our networks is produced in a context marked by a new draft of the circular normativa recently published by the CNMC, setting the remuneration for the second regulatory period, which presents an adequate and stable profitability in a medium term. Thus, the 2020-2025 CNMC draft of new remuneration confirms the 5.58% return on the regulated asset base, which is going to be 6.003% return in 2020, the remuneration of digitalisation investments according to our expectations, and define a new incentive scheme. This regulatory proposal is quite aligned to our expectation. Regulated investments, coupled with the improvement in non-regulated revenues, will enable us to partially offset the reduction in the allowed returns expected for the second regulatory period, affecting from 2020 and onwards.
Moving to slide 30, when it comes to the second enabler, Endesa acts as a demand electrification and decarbonization accelerator. Mature business, which includes e-Home and e-I ndustries, specific clients, will provide 90% of the expected gross margin and require almost 2/3 of the CapEx devoted to Endesa X to maintain the path of growth shown in the latest years. This mature business will be the base to develop other new businesses, including e-Mobility, that represent 36% of net CapEx allocated in the plan, that will barely contribute to the margin but lay out the foundations for future opportunities such as storage with batteries, the electric vehicle, and demand response. Endesa X strategy will allow us to double gross margin by 2022. Now, doing a deep dive into digitalisation, I'm on slide 31. We will invest EUR 1.3 billion, with about 80% allocated to distribution projects which are RAB remunerated.
Our digital plan will result in top-line benefits but also importance on savings reaching around EUR 150 million in EBITDA contribution by 2022, out of which around EUR 50 million will be obtained in the reduction in OpEx. We are continuing our digitalisation plan in which we have been progressing in the last two years, having already invested EUR 700 million , that has brought already around EUR 100 million in cost savings. Digitalisation of networks is focused on concrete actions oriented to the grid automation, system transformation, grid modernization, and sensor deployment, which will enable clients for an active participation in the energy market.
I would like to mention that the great technological project in which we are working on, the Digital Twin, a disruptive project that will allow us to change the way the grid is operated through a virtual grid model that increases the efficiency in the network's operations, allowing us to simulate, anticipate, and analyze the management of the grid in real time, increasing safety of our partners and enabling the penetration of renewables. In generation, we dispose of an integrated digitalisation strategy based on the implementation of data analytics to O&M activities, robotization, and the development of a digital infrastructure. The use of drones in inspection and maintenance activities, as well as smart glasses with augmented reality, among others, will allow us to operate our assets in a more efficient way.
Finally, digitalisation applies also to our customer base through processes, automations, and increasing the products and services offered, as commented before. Moving to slide 32, our efficiency program affects all our business lines, reflecting a sound evolution since 2014, -5% despite growth and investment effort of the years of the plan. For a period of the plan, our objective is to reduce our cost base in nominal terms by EUR 100 million, thanks to the efficiency improvements of around EUR 300 million, the more than offsets the increase in inflation and organic growth. A relevant part of the expected savings comes from digitalisation, as seen in the previous slide, that will allow us to improve the cost to serve and the unitary cost in networks.
Besides the integration of thermal and renewable capacity management, will allow us relevant synergies, as the resources of the current thermal facilities will be redeployed to support renewable growth. Internalization of some O&M activities, as well as contract management to increase productivity, will contribute further savings. In retail, additionally to digitalisation initiatives, the implementation of innovative tools in attention and operations, the integration of call centers, externalized offices, agile methodology to reduce time to market will allow us to further cost reduction. On the other end, we expect the cost to increase in the growth businesses line, such as renewables and Endesa X. And now, moving to the key financial indicators of the plan. And I'm on slide 34, where you can see the evolution of the financials over the planned period.
We are going to deploy EUR 7.7 billion of CapEx, increasing by 20% our investment effort versus the previous plan. We are investing more as we see significant opportunities to generate accretive returns, leveraging on our strengths as an integrated player. EBITDA shows a 16% increase over the planned horizon, reaching a level of EUR 4.3 billion by 2022, thanks to the improving conditions in the power liberalized margins, higher contributions of new renewable capacity, and further efficiencies in all businesses. Moving to the bottom line, net ordinary income raised a sound 27% up to EUR 1.9 billion by 2022. Finally, net debt is expected to grow from EUR 7.1 billion in 2019 to EUR 8.5 billion at the end of 2022, as a result of the relevant CapEx increase just mentioned. Looking more closely at the profitability on our growth ambitions, we move to slide 35.
Profitability and value creation are at the core of this business plan, whose net income to EBITDA and return on invested capital ratios shows a sound increase up to 44% and 12.1%, respectively. Regarding our credit metrics, we will be able to maintain leverage in moderate levels, moving from 1.9 x in 2019 to 2 x in 2022, despite the higher CapEx and dividends paid, thanks to the increasing generation of funds from operations, as can be seen in the evolution of the FFO to net debt ratio that reached a sound 37% in 2022. Our balance sheet remains one of the healthiest in the sector, thanks to a sound cash flow generation supporting growth increase and allowing financial flexibility to accelerate further in the future beyond 2022. Looking more closely at our EBITDA progressions, and we are on page 36.
On the basis of our strategic pillars during the planned period, EBITDA will be growing by a sound 16%, moving from EUR 3.7 billion in 2019 to EUR 4.3 billion in 2022. Electrification and decarbonization contributed to SDGs 7 and 13 will lead this EBITDA increase, which is driven by the higher renewable contribution of about EUR 300 million coming from the new capacity put in place during the period. The increase of the integrated margin mainly thanks to the renewable contribution just mentioned, hydro normalization, higher reference prices, better Supply margin, partially compensated by lower thermal spreads. Endesa X margin increase, leveraging on our existing business and the development of new products and services, distribution EBITDA reduction by 5% over the period, mainly affected by the regulatory revision in 2020 and slightly lower RAB, non-regulated EBITDA reduction by 15% due to lower RAB.
Finally, efficiencies will contribute in all businesses for more than EUR 100 million , as mentioned before, and now, moving to the bottom line on slide 37, we are forecasting a 27% increase in ordinary net income, mainly supported by the above-mentioned EBITDA increase. Tax rate remains stable during the business plan period, an average tax rate of 23%, and will be partially offset higher D&A, mainly due to higher investments in renewables, the nuclear assets' useful life adjustment, higher D&A in CCGTs due to higher revisions and enhancement programs, and higher amortization in Supply due to the expected bad debts increase linked to the higher sales and price expectations, partially compensating the reduction deriving from the coal discontinuity. Net financial results remain almost flat, as the higher gross debt and basically flat cost of debt will be offset by a lower impact of personnel financial provisions update.
Now, moving to cash flows on chart 38. Net debt is expected to increase from EUR 7.1 billion to EUR 8.5 billion at the end of 2022, or EUR 1.4 billion in absolute terms. The cost of debt is expected to slightly increase by 0.3 at 2.1% at the end of the plan, based on our interest rate assumptions. Concerning cash flow generation, the plan entails funds from operation to reach EUR 9.5 billion cumulative during the 2020-2022 period, deducting the CapEx related to the same three-year period for EUR 5.8 billion. The free cash flow generation will amount to EUR 3.7 billion. Expected cumulative dividends paid in the period will total EUR 4.7 billion, to which adding an effect of about EUR 400 million, mainly due to IFRS 16, will trigger a EUR 1.4 billion increase in net debt.
Moving to slide 39, in order to address the financial needs driven by the net debt increase in the plan, sustainable financing solution will be actively sought with an objective of having 100% sustainable debt at the end of the plan. There is a strong market appetite for this kind of instruments. We feel quite comfortable to reach such goal while obtaining very competitive financing terms. In 2019, we have already formalized the first green loan ever of the European Investment Bank, the EIB, and the first one ever also for the Spanish Instituto de Crédito Oficial, ICO, for EUR 335 million and EUR 300 million, respectively. Such amounts represent already 10% of our net debt. We are very pleased that lenders of reference, such as the EIB and ICO, have entered into this inaugural transaction with Endesa, while it also opens the doors for other corporates to follow.
Finally, our commitment to sustainability includes actively promoting similar innovative solutions among our financial counterparties. Now, I will hand over to Pepe, who will conclude this presentation.
Okay, thank you, Luca. Let me go over some final remarks. On slide number 41, we summarize our main financial metric guidance over the business plan period. As we said before, EBITDA is expected to increase at a compound annual rate of 5%. Net ordinary income is expected to reach EUR 1.9 billion in 2022, from EUR 1.5 billion in 2019, which implies an annual compound rate of around 8% higher than the previous business plan. Our dividend policy maintains 100% payout on ordinary net income until 2020 and reduces it to 80% in 2021, as committed to last year.
In 2022, we are implementing a reduction of the payout ratio to 70% on ordinary net income, which is driven by higher CapEx deployment versus cash flow generation, hence affecting leverage over time. This new reference of 70% is our medium to long-term payout perspective, from which we don't expect to deviate, as it reflects the new growth profile of the company, and it is in line with peer average. We believe that the figure presented today represents an important milestone in Endesa's equity story when we are laying the foundation to address future growth opportunities and deliver sustainable shareholder returns over the long term. Moving to slide number 42, Endesa's leadership in Iberia is driven by our first-class asset portfolio managed through a very successful integrated strategy. We have demonstrated in recent years our ability to deliver on our commitments and sometimes over-deliver, leveraging on such leadership.
The energy policies will drive further decarbonization and electrification of the economy, which will offer multiple investment opportunities over the next years. Our strategic vision supports our leadership in this evolving energy transition, and this plan reinforces our commitment to growth even more while delivering sound value creation for all our shareholders over the long term. We strongly believe that focusing on a sustainable business model across all dimensions, including the financing of it, through our direct commitment to specific SDGs is key. Ladies and gentlemen, that concludes our strategic update presentation. Thank you very much for your attention, and we are ready to take some questions.
Okay, thank you, Pepe. We stand now with the Q&A session.
Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally.
The first question comes from Harry Wyburd from Bank of America Merrill Lynch. Please, Harry, go ahead.
Hi, good morning, everyone. Thanks for taking my questions. There are three of them. So the first one's just on power prices. I noticed on slide 45, you're assuming Spanish pool prices of 53 EUR pretty uniformly throughout the plan. But the 2022 forward price, according to my screen here, is EUR 48 . And I know because you're short power, it's not simple at all. If you use a really high number, you're going to boost your profits. But I wonder, what was the reason for choosing to assume a flat or higher-than-forward curve power price?
If we marked to market and we assumed that power prices were EUR 48 , or the pool price, daily average pool price was EUR 48 in 2022, what would be the impact on your net income guidance for that year? The second one is on the new renewables. I saw on page 16 you outlined your hedging strategy, but I wondered if you could just, and if you did mention this, I missed it earlier, but let us know what the hedging strategy is for the new renewables that you're announcing today for the incremental new capacity. How do you think about that in terms of risk management? Because I guess if you're doing merchant renewables, you're replacing power output, which you would otherwise have bought in the market.
I guess if you think of a hypothetical catastrophic scenario where, for one reason or another, power prices fell significantly, when you're buying that power in the market, you've obviously got a hedge there because the power price is going to fall. If you've replaced that with renewables that you've built, obviously that's a sort of fixed sunk cost. So does your sort of risk that you're taking on perhaps increase when you're building merchant renewables? And then the final one, just on electricity distribution, I noted that you'd increased your CapEx by, I think it's 11% there. Is that fully baked in the very latest final proposals from the regulator, which, on my read, was slightly better than the proposals in July? So have you fully taken into account the better proposals, and might there be any shift on the CapEx outlook if you haven't?
And then if I can sneak a final one in, just on your debt cost. I noticed that you're assuming they go up. Enel yesterday were forecasting group debt costs to go down. Is there a reason why you're being more conservative there? Thank you.
Thank you, Harry. I would try just to answer in general terms, and then I will hand over to Luca. The first question in relation with power prices. Well, let me say that always it's very difficult, yes, to forecast the power prices. Giving you an example, in the last strategic plan, that is the 2018-2021, the price for the year 2019 was, if I'm right, something like 55, 56. And the real price will be at the end of the year 50, something around 50. So a huge difference. But we have improved our margins with these decreases.
So it is not only the price, it's how we manage the different situation and the volatility of these power prices. Having said that, when we try to figure out what could be the price in the future, I should say, first of all, that our prices around 53 EUR/MWh is the result of our models. Well, it's going to be 3 EUR/MWh higher than the one that we are going to achieve in the year 2019. And you should take into account the drop in gas and coal prices despite the increases you're doing in the year 2019. But what about our main assumption?
If you think that the gas prices will be in the levels of 20 EUR/MWh , that is higher than the year 2018, but lower than the previous year, and you consider EUR 25 per ton in the CO2, taking into account the 7% and the variable access fee, etc., etc., the gas short-term marginal cost would be 60 EUR/MWh . With these 60 EUR/MWh , we will reach something around 57, 58, but taking into account the thermal gap reduction that led us to these 53, 54. In any case, there are other studies that think about prices higher, and there are other ways to demonstrate that prices could be very close to these or above 50 or close to these 53, 55. Let me say that the year 2022 has no liquidity.
But in any case, the forward is something about 48, 49, 48, 49, but the clean spark spread is - 7. It has no sense because in the future, the combined cycles are going to be absolutely involved in the day price formation, let's say that. So if you add this 7, - 7, to the 48, 49, you will achieve something around 55. So that is very difficult, but let me try to summarize. It's not the price. I think the price is the right one, the best one that we could forecast in this moment. But it is the way in which we will manage the different situation that we are going to face in the future, for sure.
We have done very well in the past, even in the year 2019, in which the difference between the forecasted power price is huge, from 56-50. Talking about the RES and the hedging strategy, I explained that we have one third based in our PPAs contracts and one third based in our portfolio of customers, B2C customers, and the other third in the general portfolio. I think that this is a huge advantage being an integrated company that will give us the possibility to go ahead and to speed up our renewables CapEx. That gives us leverage higher than 11. In terms of the distribution, of course, I should say that the last year when we forecasted the margins in distribution, we were right.
More or less, we have stayed at the end the same figure that we had in our strategic plan. So we are not better and we are not worse than this situation. And that gives us the possibility just to go ahead with investment in distribution, which will be, as we have said, one of the main enablers for the development of the renewables, the charging points for electric vehicles, the self-consumption, etc., etc. So an enabler of the decarbonization. But Luca could.
Yes. Hi, Harry. Good morning. I mean, going through your questions, so the first one, which Pepe explained why we're taking that assumption, the impact at gross margin level is of doing the mark-to-market to 48, which is the forward, which, again, I would like to underline, is completely liquid at this point and has also clean spreads of - 7, which doesn't make any sense.
Anyway, doing the mark-to-market, we're talking about 35 TWh of price-driven production, and it's about EUR 150 million of gross margin less if you were to do the mark-to-market. Going to the second question, the hedging strategy. Our assumption for all the renewable capacity is that we're going to hedge, as Pepe described. One third long-term PPA sold to B2B customers, 1/3 to our B2C customers, which stays with the company more than five to six years, so are the sticky customers to us. The remaining 1/3 are basically merchant, if you want to call it merchant. Anyway, the increase in renewable capacity offsets, obviously, the reduction of thermal capacity.
So here, the risk, I would say, progression is actually towards a less risky business because we are substituting a commodity-based business through something which is much more visible as of renewables, which has a very lower marginal cost than thermal generation. To the third question, distribution, yes, it takes into account the last draft of the CNMC, which has positive and negative effect vis-à-vis our assumption in the previous plan, but more or less is aligned. Going forward beyond 2022, yes, we could actually think of investing more given that we have more clarity on this framework. And then finally, on the cost of debt, it increased by 0.3 in the plan because our assumption of interest rates goes from 1.6% in 2019 to 2.9% in 2022.
If we were to do the mark-to-market again here on interest rates, so using forwards, our cost of debt in 2022 would be 1.6%, i.e., decreasing 0.2%. So again, I think we are very conservative also on this one, and there is room for improvement.
Many thanks, Harry. Next question comes from Enrico Bartoli from MainFirst. Please.
Thank you for taking my question. First question is related to slide 36. You highlight significant improvement in the contribution from EBITDA from Generation and Supply. You mentioned increasing prices and improvement in the Supply margins. Can you elaborate a bit on this and on how confident you are that actually there will be this kind of trend over the next years for the planned period? Second question is related to slide 25. You expect a 4% increase in sales of energy over the planned period.
Can you elaborate a bit on, let's say, the competitive scenario that you expect for the three customers? And also, in this case, how confident you are to increase the electricity volumes that you expect to sell to your customers? And last one is on the numbers. If you can give us a level of D&A that you expect for 2020, sorry, after the write-off of the coal plants and what you assume in 2022, and your assumption in terms of evolution of the regulatory working capital and your expectation for evolution on that debt. Thank you.
Thank you, Enrico. I will try to answer the second question in relation with the volumes, the competition in the Supply business. You are right in the sense that we live in a tough scenario with high market competition. We have the oil and gas new relevant operators like Repsol and Cepsa.
Also, we have small suppliers, most of them digital natives, some of which have already reached a medium size. And also, we have the incumbents setting strategies to defend their market share. So we have been competing in this very tough scenario during the last years. I remember two or three years ago when we tried to establish a floor in our margin, Supply margin of 7 EUR/MWh . And on that occasion, I remember some question about if it would be sustainable, these 7 EUR/MWh , that looks a little high. Well, managing in the way in which we have been managing this margin, not only have we maintained the EUR 7, we are above EUR 9 in this year.
So let me say that despite this tough scenario, we have been able to consolidate the Supply margin, and we think that we will be able to do above EUR 9, something between EUR 9- EUR 10 in 2022, supported by what? First of all, our customer mix improvement. We are going to move clients from the regulated market to the liberalized market. And second, with our customer value management strategy, let me remind you that we are working on the customer loyalty and retention of these customers based on preventive campaigns through advanced analytics. We are offering new integrated and customized solutions to the customer, increasing their value for us. We are launching new innovative tools in customer care through digital channels and customer self-management. We are launching new sales channels, strengthening, on the other hand, the traditional ones.
We are focusing on client experience, and we are digitalizing all the processes to reduce the cost to serve. As Luca has said, we will have the new CRM and the SAP IS-U, the back office for the back office processes ready by the mid of the year 2020, and new digital channels. All in all, I'm trying to summarize. Well, I feel absolutely comfortable because we have demonstrated that we are able to manage this situation. We are going just to increase this 4%, this roughly 4 TWh , and we will be able to maintain and slightly increase the Supply margin.
Then going to your first question, Enrico, the evolution of the price margin across the plan is an increase of about EUR 600 million in terms of margin, which is driven by volumes.
And in volumes, we have obviously the new renewable capacity, which is about 7 TWh. That has a positive effect of EUR 320 million. Then you have normalization of hydraulicity, which, as you know, 2019 has been a very dry year, which affects for about EUR 60 million in the plan. Then for price, so basically starting from what is the 2019 price, adjusting to our assumption of 53.3, these are an effect of EUR 160 million for our gross margin given by the 35 TWh of our price-driven generation. Then Supply margin has a positive contribution of EUR 70 million, which is driven by a price effect which is minimal, about EUR 20 million, and a volume effect of the 4 and something terawatt hours of increasing volume just commented by Pepe that has a EUR 40 million-EUR 50 million contribution to margin.
Then obviously, and this acts, as I mentioned before, has a contribution of about EUR 50 million in the liberalized margin. And then obviously, we need to offset lower thermal spreads for about EUR 50 million, and obviously, the raise of tax in [EUCA], which will start in 2020, which affects for about EUR 30 million, and also offset the suspension of the 7% generation tax, which was a positive in 2019. So those are the drivers more or less of the liberalized margin. Obviously, you need to take into account that also the efficiencies that are linked to the liberalized margin will have a positive effect overall on the EBITDA. Then to your third question on D&A, so 2020, our assumption after the coal phase-out positive impact is D&A below EUR 1.6 billion. The growth above EUR 1.7 billion in 2022.
Those are the drivers of the D&A, as I mentioned when I was presenting the slide 37. They are driven by basically higher investment in renewables, the adjustment of the nuclear assets' useful life, higher D&A in combined cycle and CCGTs due to higher revision, and obviously, the enhancement programs of this technology that will produce more going forward, and some higher amortization in Supply because obviously, revenues will be higher and also bad debt will be higher. Those are the effect on D&A. Then finally, the assumption of regular working capital for our net debt is decreasing from the EUR 1.2 billion expected in 2019 to about EUR 1 billion in 2022, and that is mainly for non-mainland.
We have now Javier Garrido from JPMorgan. Javier, line is open.
Thanks. Good morning. The first question would be on the outlook, I mean, beyond 2022, or honestly, life will go on, and I would like to know what are your impressions firstly about the growth in renewables, whether you see further acceleration beyond 2022, and also how you see that feeding through into your results, because I'm not sure how much of the capacity that you are adding in 2022 will be contributing to earnings in that year in 2022. So two questions then firstly, how much is contributing in 2022, and secondly, what do you expect in terms of capacity additions, whether there should be an acceleration beyond that year or you have reached your steady rate of capacity additions. Then the second question is also for the long term.
You have explained, I think, in a very detailed way why you see power prices sustainable at around 53 EUR /MWh and why you see margins in Supply going up. When do you think the trend will change? And obviously, you don't have the crystal ball about which specific year, but what is the driver? When do you think that the reduction in the thermal gap will be sufficient to drive a drop in power prices? And then the final question is on the dividend. You have lowered your payout ratio for 2022 to 70%. But I have 32 questions, if I may. First one is, is that the end of the lowering of the payout ratio? You have historically said you could see 70%-80% as the normalized payout ratio, and we're now at the bottom. And secondly, why?
Why, with your targets, you are looking for a net debt to be down to around 2.1 x after having accelerated your renewable development? So what is the rationale? Because I'm sure you will argue that you have acquisition opportunities, but so far, and it's been a long time, as you have been detailing in your presentation, since 2014, you haven't really used much into M&A. So why the drop to 70%? Thank you.
Thank you, Javier. And I will try to give you some clues, and then Luca will specify exactly. Long-term power prices and margins, when this trend will finish, let's say that. Well, first of all, as we have said in our models, what we see is prices above 50 EUR/MWh up to the year 2030.
Let me say that in the national energy and climate plan of the government, the price in the year 2030 is something around EUR 56, and this is aligned with our models. When? It would depend on the thermal gap. The manageable thermal gap, which is not only the combined cycles and the coal in this year, but also the hydro that could take price replacing the, in that case, the CCGTs. And I think that at least our models said that once we reach the year 2030 with 65 GW more of renewables, then we go into very volatile years in which slight changes in prices and situation could change the price going up or down. In that moment, I think that it would be impossible to maintain the mechanism that we have today to set the price, this marginal price.
We will need for sure capacity payments. We will need another framework. But trying to answer your question, we believe that prices in average year will be higher than or above 50 EUR/MWh up to the year 2030. And then who knows?
Then, Javier, going to your first questions, what is the how to look beyond 2022? I mean, first of all, commenting the renewable progression in the plan, we have, as you know, 500 MW more or less in 2020, then goes up to 900 MW in 2021 and to 1.4 GW in 2022. I mean, here you could see that basically we are going to increase further in the outer years of the plan. At the moment, we are forecasting 1.6 GW, 1.8 GW additions per year, but this is today's assumption. And as always, today's assumptions are always, I would say, conservative.
Yes, the growth beyond 2022 will be greater in terms of renewables addition. And going specific to your question, what is the contribution or the non-contribution of CapEx in 2022? It's basically EUR 800 million of CapEx that we're spending that year that are not contributing to our financials in 2022. That will contribute about EUR 90 million at the EBITDA level in 2023 and EUR 135 million in 2024. Then going to your third question on dividend, yes, as Pepe commented, 70% is our medium to long-term payout perspective, and we do not expect to deviate given the assumption of growth I just commented. And then on the why is exactly for that reason. So at the moment, the cash flow generation is not sufficient to basically contribute to pay CapEx and dividends.
So we need to find a balance, and obviously, it took two years to get to a level which we think is a balance between the growth that the company will generate and the cash flow generation that will support this kind of growth. So yes, it's the end, and that's the why.
Thank you, Javier. Next question comes from Antonella Bianchessi from Citi. Please, Antonella, go ahead.
Yes. Just a quick, can you just repeat why in your assumption you're assuming that the cost of debt will increase in 2022 and what the company can do considering the evidence of lower rates in the market and so on and so forth? My other question is on the tariff deficit in the islands. When you expect this cash to come back? There is a plan, there is a date, there is a discussion with the regulator to basically clarify this point. Thank you.
Thank you, Antonella. I will try to give some clarity to your second question. The real thing is that in the island, since the year 2013, we're waiting for the regulatory framework that allows us to go ahead with the needed investment. Let me explain. You know that on that occasion, I mean the year 2013, it was established that there should be a specific situation to approve any new investment if you want to be remunerated. We could go ahead with an investment, but we will not be remunerated if it is not previously approved following a specific procedure. We are waiting for the approval of this coming from Brussels. That is the first thing.
The regulator has decided to change some things during the last years just because it was needed to do some kind of investment, that the regulator doesn't want to give these extraordinary measures if it is not really needed. In the past strategic plans, we decided to think about that this new regulation will come in the next year and then just to put some kind of investment in our strategic plan. We had been doing that since the year 2013, and this year we have decided to stop with this new investment and to wait for the regulator. That is, when we will increase, well, when we have the opportunity to go ahead with this investment.
On these questions, the tariff deficit implied in the assumption on the debt, as you know, is EUR 1.2 billion, Antonella, for 2019 and goes down to EUR 1 billion in 2022 at the moment. The reduction is in non-mainland. We see this number to be structurally in the region between probably EUR 400 million and EUR 500 million rather than being EUR 800 million to EUR 900 million. So that's the gap that we are, as Pepe commented, trying to sort out with the regulator. In terms of cost of debt, so let me first say that 1.8% is the current cost of debt that we have is the lowest cost of debt of utilities in Europe, even lower than regulated peers that are in the 2%-2.5%.
Why it increases in the plan? Because our assumption of interest rates, as I commented before, goes up from 1.6% in 2019 to 2.9% in 2022. And again, if we were to use forwards here, so assuming what is the forward in 2022, our cost of debt will go down to 1.6%. So a reduction from the 1.8% that they currently have. What are the actions that we can actually implement? Obviously, we will see what interest rates will do, but I think it's a conservative assumption seeing interest rates going up in the next three years given the macro situation at the moment.
And two, our liability structure is pretty efficient. We have 40% of intercompany debt on a long-term basis, and then we manage the rest, 60% between shorter debt and bank lines. ECPs or commercial paper are in the negative thresholds, i.e., they pay us to basically fund us, and interbank lines are in the slight positive thresholds. So again, the cost of this 60% of our liabilities is pretty nil. So that's the answer on the cost of debt.
Next comes from Meike Becker from Bernstein.
Thank you for taking my question. I have one very detailed follow-up on your long-term price outlook, and then I think two more general questions. So the detailed follow-up is when you said that you see, even in 2030, the average wholesale price in Spain at 50 EUR/MWh or higher. I was just wondering where you see the price point at the middle of the day. So I think some of your peers presenting a similar outlook put that midday price point more at the 20 EUR/MWh . And leading on from that, I was just wondering for the merchant part of the renewables that you are going to build going forward, especially for the solar, what are you assuming for your IRR calculation?
Are you more assuming the 53 in 2030, or are you assuming that EUR 20? Or does it even matter because with the short-term prices so high, you'll have your payback even before that? So that's a little bit the detailed question on the long-term prices. Then the two more general ones. On your slide number 18, where you talk about the role of the network operators, the TSO versus the DSO, I was just wondering what the split between the two operators is in terms of investments. My perception sometimes is that renewables will be linked to the transmission network versus for the distribution, it is about distributed renewables and, as you say, about aggregators. So I don't know if you have a split in mind for the network investments between the two. If you have, it would be great if you could share it.
And the third question is probably even more conceptual. Apologies for that, but to hear your thoughts would be very valuable. When I talk to investors, usually the pushback when looking at the investments in renewables and the network, and especially the strong acceleration thereof, is who is going to pay for that? And aren't electricity bills going up? I mean, my perception is that there are other moving parts, for example, the low interest rate environment. So while you're increasing the investment in the network, at least short-term, the average bill doesn't go up. But I was just wondering what is your view on how electricity bills would develop long-term to pay for all of this?
And if there are even some discussions that are taking place with regulators and politicians, how they see it, and if prices go up, kind of like what the appetite for that would be? Thank you.
Thank you. I will try to answer this last question. As you know, today, Bill, 50% is not related, directly related with the supply of electricity. That has the compensation, different compensation for renewables, for the island, the compensation to cover the historic deficit, and so on, other taxes and things that, mainly, in my opinion, are not going to be necessary in the future. So that is one of the ways in which it would be possible.
Even more, in our proposal to the regulator, is really to split and to put out of the bill some of these charges because we think that it has sense just to really split between other actors, energy actors, etc. But in any case, this 0.5% of the bill should decrease and will decrease in the future, for sure. So I really think that in the future, even increasing the investment in network, renewables, etc., we will face a lower bill for the customers.
Then going to your first question, I mean, it's very difficult to give you an estimation of midday power price in 2030, to be honest. But if the system stays like it is, to be honest, and CCGTs being the technology that will set the price, even a midday power price will remain sustained.
That's what I can say at the moment, but it's very difficult to give you something more in 2030. When it goes to the IRR calculation and the portion of merchant that we're developing, as you said, I mean, payback for solar is much earlier than 10 years. To be honest, yes, the assumption is the PPA price estimation that we have even long-term, but in the end, it's not needed because, I mean, the project reached its IRR much earlier than the 10 years timeframe that you were mentioning. Sorry, the last one, role DSO versus TSO. I just comment here that the National Energy Plan in Spain foresees about EUR 40 billion of investments between DSO and TSO over the next 10-year period, which is split about EUR 29 billion, more or less, for the DSO and the remaining for the TSO.
60%-65% should go in terms of investment to the DSO, so therefore more beneficial to us than actually the transmission operator.
Next question comes from Anna Maria Scaglia from Morgan Stanley.
Hi, good morning. Thank you for taking my question. I have just a quick one on slide 38 where you have the cash flow and the debt evolution, and you said the FFO is EUR 9.5 billion. I was wondering what the assumptions are there in terms of working capital movements, if provisioning, etc., if there is something we should take into account. Thank you.
Yes. Hi, Anna Maria. We don't have, let's say, the assumption is we are not having negative working capital in the three years of the plan, so there is no, let's say, negative impact from working capital there. As far as provision payments, it ranges, I would say, between EUR 200 million and EUR 300 million per year.
We have now Stefano Bezzato from Credit Suisse.
Yes. Hi, good morning. Three questions for me. The first one on the Supply margin. So you have proved that there was no downside on the 7 EUR/MWh that you set or you targeted a couple of years ago. Let me turn the argument now then. Do you see any upside on the 10 EUR/MWh Supply margin that you are targeting now for 2022? The second question is on renewables. You are planning 3 GW of additions in 2020- 2022. In your pipeline, you have 3 GW COD over the same period. Does it mean, is that pipeline flexible at all, or does it mean we should assume 100% success rate on the 2020- 2022 pipeline?
The last question, just a clarification. If you can please remind us, you told us that you are selling power at around 7 4 EUR/MWh , but the all-in revenue is EUR 68. Can you please remind us what's the difference between the two numbers? Thank you.
Stefano, I will try to explain or to give my opinion about the Supply margins and if there is any upside in the 10 EUR/MWh . We feel comfortable in the range of 9- 10 that we have in our strategic plan. We will see what happens. We are working just to give more value to our customer and to obtain more value. But with the assumption that we have in this strategic plan, we aim to obtain, to achieve this margin between 9 and 10. Downside, not upside, but we will see what happens.
Hi, Stefano. Regarding the renewable power, obviously, this is a moving pipeline every day. I mean, so a lot of the early stage, the 12 gigawatts can fall into the 2020, 2022, and beyond 2022, so it's not 100% successful rate. Generally, what we try to do is to have a pipeline which is greater three times what we need to construct in order to choose the best projects. So you should see the early stage moving into a ready phase during the planned period.
And then, regarding the selling price differential between the 74, 75, which all-in and which we hedge, and the final revenue price at 68, 69 recognized before, you should take into account all the indexed portion that we have in our sales, which accounts for, I would say, between 30 and 40 TWh of energy that obviously affect the overall price because the margins there are much, much lower.
Next question comes from Jorge Alonso from Société Générale. Jorge, line is open.
Hi, good morning. Several questions, please. On the cash flow, do you expect some cash out from the workforce restructuring, or it is already almost over? The second one is, is the effective taxes paid going to be similar to the ones to be accounted in the P&L, or do we have some cash flow impact, positive or negative, of that?
The third one on the tax rate as well. You mentioned 23% flat throughout the period, but this is already considering the potential impacts from the measures coming from the new government plus the impact coming from the tax breaks due to the write-off and the coal plants. And the last one is on the CapEx per megawatt on the renewables. If you can provide more or less what are your assumptions there and what are the performance you see or do you expect going forward on the CapEx on the renewables? Thank you.
Hi, Jorge. Good morning. Regarding our cash flow, as I commented before, we see basically provision payments ranging between EUR 200 million and EUR 300 million per year across the plan. So that's the provision line that you should take into account as far as cash flows.
When it goes to tax rate, the tax rate I mentioned does not take into account a change in the current tax schemes, and obviously, we cannot take into account because there is no formal proposal at the moment on the table, and as far as the tax breaks from the coal closures, yes, it takes into account, but these impacts are really marginal on the overall tax rate of the group, then going to the CapEx per megawatt, we are in solar in an average of EUR 0.7 million, and when it goes to wind, we are in the EUR 0.9 million-EUR 1 million CapEx per megawatt.
Okay. This was the last question from Nicole. And to be honest, we have received several questions from the web, but most of them have been tackled during the conference. Yes, three questions for Barclays. First one, talk about the efficiency target, EUR 300 million in 2022, if this is related to some kind of restructuring provision or something like that. Second question, talking about the estimated increase in coal production for the next year, that it makes sense bearing in mind that we are estimating a hydro normalization for next year. The third one is if we can clarify the impact of in the D&A of shortening the useful life of nuclear.
Okay, Mar. Regarding efficiency, the EUR 300 million does not take into account any restructuring plans or provision for that. Regarding the question number two on the coal production estimate for 2020, yes, we have about 8 TWh of production in coal estimated for next year given the hydro normalization. To be honest, this year has been about five, and we managed to cover it through basically OTC acquisitions in the market.
I think it's a conservative assumption in the sense that actually production could be less than that next year, and obviously, that will have no impact whatsoever in our margin contribution. And third, what was the third? The nuclear. So the impact of adjusting useful life is about EUR 50 million of additional D&A per year.
Okay. That's all. Just remind you that IR team will be available in case you have further questions. And thank you very much for your attention, and have a nice day.