Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our twenty twenty first half results presentation. And more important, we hope that you, your family, friends and colleagues are all safe and well during this global pandemic. Now on to the reason why we are all here, our H1 results presentation, which will follow our normal format. Firstly, we will begin with an overview of the results and the main developments during the period given by the senior executive team that we usually have with us: our Chairman and CEO, Mr.
Ignacio Galan Mr. Francisco Martinez Corcoles, Business CEO and finally, the CFO, Mr. Jose Seinth. Following this, we will move on to the Q and A session. I would also like to highlight that we are only going to take questions submitted via the web.
So please ask your question only through our web page, www.iberdola.com. Additionally, we expect that the today's event will not last more than sixty minutes. Hoping that this presentation will be useful and informative for all of you, now without further ado, I would like to give the floor to our Chairman and CEO, Mr. Ignacio Galan. Thank you very
much again. Please, Mr. Galan. Thank you, Ignacio. Good morning, everyone, and thank you very much for joining today's conference call.
Over the last month, we have gone through some of the most challenging times in our lives. Fortunately, in Europe, the spread of the virus is now widely under control, and other geographies are also showing positive signs. I hope you and your families stay well. The confinement measures that had to be implemented as a consequence of COVID-nineteen are having a pro form a common impact, and now probably the main challenge we have ahead is to contribute to a quick and sustained social recovery. Our first priority in these months has continued to be the safety and welfare of all our employees, customers and society at large.
From the donation of health care material worth more than €30,000,000 to the authorities of the countries we operate, to the service to millions of people who depend of our operation to power their houses and businesses, I am proud to say we have delivered on our responsibilities. Thanks to the dedication and professionalism of all our employees who have always put their duties first. Quality indicators have remained at normal levels during the crisis, and we have guaranteed the supply to critical infrastructures. My most sincere gratitude to all the women and men who work for Iberdrola Group, especially those who have been in the field over this month. They all make this company outstanding.
Building on our investment in digitalization and technology, we have put in place all the necessary precaution measures to maintain our operations and now to enable a safe return to the workplace. I am glad to say that just a few days ago, the international certification company, Einor, has granted the Iberdrola Group a global quality certificate for the comprehensive system of measures we have put in place to manage the effect from COVID on all our stakeholders and especially on our employees. As a consequence of these measures, employee infection rates has been much lower than the average rate in the countries where we operate, in some cases, up to 10x lower. However, we have sadly suffered the loss of two employees worldwide. Our thoughts and our support are for with their families.
Now it's our responsibility to go back to normality, always in a safe manner and in line with local regulation applicable. In Continental Europe, we have already completed the reentry plans, and all our employees are back in the office, which have been adapted to ensure social distancing. And similar plans are progressing in other geographies with approximately 50% of our office staff already in workplace in U. K. And United States, for example.
The commitment of our workforce has also enabled us to maintain our ambition investment program. Despite lockdown measures, in the first half, we increased investment compared to 2019, which, as you know, was already a record year, reaching €3,600,000,000 in just six months. The close collaboration to our supply chains has been essential to achieve this. In order to help our suppliers maintain their activity and provide them the visibility they require, up to June, we have awarded contract totaling €7,000,000,000 to them. Since the outbreak of this crisis, we have also focused on keeping security of supply to the home industries we serve in all countries implementing measures to protect the special vulnerable group, including a free of charge service for in home electric repairs enabling a special energy service center for them.
It is our commitment to continue navigating this situation in full compliance with our model, which seeks to balance and maximize the interest of all our stakeholders, including, of course, our hundreds of thousands of shareholders. And in the 2020, we have delivered once again increasing results. 2010 adjusted EBITDA, with the COVID impact, exceed €5,000,000,000 with a 4.2% increase year on year. Including COVID impact, reported EBITDA reached 4,118 million euros Over the quarter, we have continued executing our plan. As mentioned, investment reached 3,600,000,000.0 year to date.
From April to June, even with lockdown in many of our countries, we have managed to increase investment versus first quarter. We've also continued improving efficiency with net operating expenses down 33.3% year on year. And we have reinforced our financial position, thanks to our full access to market, having even increased our liquidity. In the last month, we have continued reinforcing our growth potential in the medium and long term through transactions in Australia, France and Sweden, which create new development platforms for the company as well as with the new addition to our pipeline of renewable projects, which is now close to 60,000 megawatts, reaffirming our unique position as first runners in the global transition to clean energy. This leadership is well recognized by ESG agencies and specialized investors, which rank Iberdrola among the top performers.
All in all, adjusted net profit rose by 7.5% and reported net profit, which includes minus €153,000,000 of COVID-nineteen impact and the effect of the U. K. Government decision to maintain corporate tax rate at 90% as well as capital gains from divestment reached $1,145,000,000 euros up 12% versus previous year. Focusing now on group operating performance. Adjusted EBITDA increased by 4.2% to 5,075 thanks to the positive evolution of renewables and generation and supply.
Renewables EBITDA was up more than 5% due to the contribution of new capacity installed over the last twelve months, mainly in U. K, thanks to East Anglia ONE offshore wind farm now fully commissioned. The increase in production in The United States, driven by new capacity and the normalization of the equipment resource and improvement achieved in the availability of our green split as well as increase of hydro production in Spain and Brazil. Hydro reserves in Spain stand at more than 7.5 terawatt hours, 60% above previous year levels. Generation supply EBITDA reflects an increase in production as well as the impact of price hedge and lower procurement costs.
In addition, despite market situation and still challenging result in U. K. Improved significantly year on year, thanks to the adjustment made in the tariff cap methodology in the fourth quarter twenty nineteen. However, additional adjustment will be required in the coming months to reflect the impact of COVID-nineteen. Finally, net worth result continued to be affected by the transition to the new regulatory period in Spain, which we expected to be offset in the future by the higher asset base, especially if the government continues to increase the investment cap which was adjusted very slightly in a few months ago.
In United States, despite the stable result in U. S. GAAP, driven by the positive effect from the new rate cases in Connecticut and Maine, EBITDA in IFRS has been impacted by temporary adjustment related to deviation in demand and energy cost versus assumption. As you know, these amounts are fully recognized as regulatory asset and therefore, will be recovered in the future with positive impact in consolidated results in future as well. In Brazil, the aside from tariff reviews, a higher efficiency more than compensate foreign exchange evolution.
All in all, COVID-nineteen has a total impact of €157,000,000 at EBITDA level. The operating situation we were standing to suffer due to the pandemic when we held the last representation in generation retail market in Spain U. K. In April is gradually normalizing. Monthly power demand has been consistently recovering by around 1.1% per week, moving Spain from minus 18% in April, minus 25% during the worst week to minus 5% in July.
As a result, we are reaching levels closer to those registered before the crisis. Similarly, 2021 forward prices are moving upwards, having increased by around €5 per megawatt hour in the last month. In any case, all our production for 2020 and most of 2021 output is already hedged. Regarding customer debt at retail business, total rolling credit cost stands at 0.94% of total sales, 30 basis points above usual levels. Our CFO will give more details later on.
In our regulated business, COVID-nineteen impacts are expected to be mostly covered by regulatory framework, and we have made significant progress over the last month in United States and Brazil. In United States, we filed a joint proposal with the staff of the commission and 21 parties more for a new three years rate case in New York, which will imply more than doubling our investment in the state at a return on equity of around 9%, also improving cost recovery, for instance, in the case of storm and vegetation management. We expect final approval by the Board of the of the regulator in October with full compensation of the delay of tariff adjustment from April to November. United States regulators are also launching initiative to track all related expenses in order to allow recovery in the future years. In Brazil, an agreement was also reached to recover extra costs related to COVID-nineteen through end of balance sheet loan that will imply BRL $1,660,000,000 for Neoenergia, and an extraordinary tariff review is also already under negotiation that we expect will be finalized after summer.
Thanks to all regulatory adjustment, we expect to recover most costs related to COVID between 2020 and the following years. The current circumstances have also led us to an extra effort on cost rationalization, having achieved a decrease at net operating expenses of 3.3% to 2,074 million euros even after the inclusion of €33,000,000 of one off expenses mainly due to donation of medical equipment like ventilators related to COVID-nineteen. All in all, the ratio of net operating expenses to gross margin improved by 30 basis points year on year to 25.8%. As mentioned, gross investment reached 3,582 million euros driven by Networks and Renewables, which increases about 4% in both cases. This business contributes to 90% of total gross investment.
Lower investment in generation and supply, partially related to the slowdown of new commercial activity, fell by 70%. Let me highlight once again that quarter on quarter, our investment increased by 7% despite lockdown in most countries. This lead us to maintain our expectation to invest close to €10,000,000,000 in 2020. In terms of new capacity up to you, we have commissioned 1,600 megawatts, and we continue with our plans to install over 2,000 megawatts in the second half of the year, including close to 100 megawatts in Spain with nine projects under advanced construction, 500 megawatts United States, where we have seven projects progressing, with the rest corresponding to U. K, Mexico and other countries.
We saw in the last twelve months, we have installed almost 5,000 megawatts, and we have more than 7,500 megawatts already under construction for commercial operations mostly before 2021 end. Operating cash flow also grew in the first half, reaching 3,122 million euros allowing us to combine the acceleration of investment with the reinforcement of our financial external liquidity. Our FFO to adjusted net debt ratio stands at 21.7%, an improvement of 110 basis points versus twelve months ago. In terms of access of capital market, despite the overall contraction of serving the debt market, in the last two quarters, we have been able to issue 2,700 million euros of new green and sustainable financing, driving group total sustainable finances to close to €23,000,000,000 now. Following this performance, credit agencies have recently confirmed their ratings for our withdrawal.
This comfortable financial position allow us to continue looking for growth opportunity through the greenfield acquisition of the addition of new project to our pipeline. In both case, we are following the same strategy of the last two decades, integrating new companies in new countries and transforming them into platform for organic growth. That was the case in U. K, United States and Brazil, where we have multiplied investment by two or even by three since the integration in the group. In the last month, we have announced three transactions that replicate this model.
In Australia, we already have a 300 megawatt wind and solar hybrid project under construction. And following one year of conversation, we launched a friendly takeover bid for Infigen, one of the country's largest renewable developers and a company with a strong customer portfolio and deep know how of the Australian PPI market. This company will add 1,100 megawatts to our installed capacity and a growing pipeline of projects, which today has already more than 1,000 megawatts. In France, we have reinforced our presence in the onshore wind market through the integration of Alto Power, a renewable developer with 800 megawatts in operation or advanced development. Additionally, we have become 100% owners of the company developing the Sandbrick offshore wind farm, which is four ninety six megawatt, as you know, which is progressing well to reach commercial operation by 2023.
In offshore wind, we have also closed a transaction that create huge potential opportunities for the next decade in Sweden, a country with a clear plan of substituting nuclear power with renewables in the late 20s and 30s, reaching a project portfolio up to 9,000 megawatts that could start operating from 2019, putting us in a position that reminds me what we did in U. K. Ten years ago when the Isanglia Thon action was held. On this project, we further reinforced our renewable pipeline, which, as today, reaches 58,000 megawatts. 60% of these projects are located in The United States and Spain.
In United States, we have 20,000 megawatts in total, out of which 7,500 are offshore wind, 5,000 megawatts offshore wind and 8,500 solar photovoltaic. In Spain, over the last year, we have increased our P and I by 30% to reach 14,000 megawatts of solar photovoltaic and onshore wind. The remaining 40% is spread over Brazil, Mexico, Continental Europe, U. K, where we have already, as you know, 4,500 megawatts of offshore wind project and the rest of the world. Out of this, total, we already had 7,000 megawatts of renewable capacity under construction, 80% which will be finalized by 2021, with 1,000 megawatts of onshore in Brazil completed in 2022 and the San Briggs offshore wind project in 2023.
Additionally, we have 14,000 megawatts, which already had permits, most of which will be operating by 2024 thirty seven thousand megawatts more of pipeline in early stage of development will mature for 2025. Let me highlight our pipeline in offshore wind, which amounts to 12,000 megawatts in United States, U. K. And Continental Europe, with full CVET rights before including the transaction of Sweden. In order to assess the dimension of offshore wind pipeline, it's essential to understand that offshore wind generate around 5x the EBITDA per megawatt of other renewable technologies like, for example, solar photovoltaic.
As you see, Iberdrola taking a leading role in the acceleration phase we are entering. All countries are taking multiple measures to anticipate investment in many cases driven by reconstruction plans. In Europe, the European Commission presented the long term budget for the period 'twenty one to 'twenty seven €1,100,000,000,000 and the next generation EU recovery plan with an allocation of €750,000,000,000 which of which more than half, $390,000,000,000, will be subsidies with the rest being loans with the different levels of conditionality depending on countries. Close to €460,000,000,000 that is more than 25% of the combined amount, will be dedicated to green and climate related investment. In Spain, the government has submitted a revised national climate and energy plan to Brazil and is also reaffirming the green ambition with a climate change and energy transition bill that is currently being discussed at Congress.
In U. K, the Grid Recovery Fund was also approved. In United States, around $3,000,000,000,000 were approved by the federal government to provide relief in a wide range of areas which respond to COVID pandemic. A new PTC extension was also passed with five years of safe harbor. At the state level, we continue to see more and more ambition green target.
For instance, New York has set an objective to reach 70% of renewable energy by 2030 with the coming offshore wind actions, and Virginia has also increased offshore wind ambitions. Finally, in Brazil, an economic stimulus package was approved for around BRL $750,000,000,000. As we anticipate in last result presentation, we are currently executing new Iberdrola retrobuthion flexible program, which will amount to at least €0.232 per share, either in cash or shares and will be paid on the August 4. Adding up the interim dividend paid in February, total commercial holiday remuneration amounts €0.4 per share, reaching already the floor set for 2022, three years in advance. Reaffirming our model that seeks to create sustainable value for all our stakeholders, including, of course, our shareholders, a model that has made us a best in class company in ESG investors.
After twenty years anticipating the transition to greener and more sustainable energy system, today, prestigious international entities such as Rovico's SAM or MSCI are giving us the highest rating and the largest investment fund in the world. BlackRock consider our bond as dark green, their highest green bond rating. Just a few days ago, we signed a new facility with the European Investment Bank and the ECO for €100,000,000 driving the total green and sustainable financing in the group for more than €22,000,000,000 now. I will now hand over the CFO, who will present the group financial results in more detail. Thank you.
Thank you, Chairman. Good morning to everybody. I will now go through the results. I would like to start explaining the two main COVID impacts considered in our accounts, totaling €228,000,000 at the EBIT level, euros 157,000,000 related to demand decrease affecting both generation and supply up to €92,000,000 and network business, 65,000,000. As I was saying, this is 157,000,000 goes at EBITDA level.
And another €71,000,000 of bad debt accounted for as provisions, reducing our EBIT, euros 35,000,000 in the network business and €36,000,000 in generation and supply. In networks, as the Chairman has said, we're expecting recovery of most of the impacts through the regulatory mechanism. And in generation and supply, bad debt impacts will be managed through our commercial activity. And as also the Chairman has pointed out, we have submitted a proposal for recognition of impacts in the SVT tariff into The U. K.
Regulator. Our reported first half EBITDA decreased 1.4% to 4,918 million euros but our adjusted EBITDA is up 4.2%. FX lowered our EBITDA by another €92,000,000 related basically to the real evolution that has depreciated 19% against the euro during this period. The dollar rose around 3% and the sterling was flat. Reported net profit was 12.2% up to $1,845,000,000 and adjusted net profit is up 7.5%.
Our adjusted results already advanced by the Chairman, as we have explained already in the Q1, exclude the most relevant nonrecurring items, both in 2019 and twenty twenty first half, but does not consider any FX impact. As you can see in the slide, twenty twenty first half adjusted EBITDA is 5,075 million euros excluding the €157,000,000 COVID demand effect. First half twenty nineteen adjusted EBITDA was 4,868 million euros instead of the 4,990 million reported as it excludes €121,000,000 of nonrecurring, 89,000,000 from our LNG contract sale that we did in the second quarter of twenty nineteen and thirty three million euros from settlements in the Spanish networks. As a consequence, adjusted EBITDA grew 4.2% instead of the 1.4% fall reported. If we would have added the FX impact, 92,000,000, our adjusted EBITDA would have grown 6.1%.
Adjusted net profit of $1,670,000,000 euros instead of the $1,845,000,000 euros reported, exclude all the COVID net impacts in our accounts: euros 153 net of impacts, the already mentioned on the EBITDA level and another 71,000,000 of bad debt net of taxes. Adjusted net profit also exclude the EUR $485,000,000 of the GAMESSA gain and another minus EUR 157,000,000 of nonrecurring negative tax impacts mainly due to The U. K. Deferred tax impact as they did not reduce the tax rate to 17% from 19%. As a result, adjusted net profit grew 7.5% instead of the 12.2% growth reported.
Revenues fell 9.9% due to €16,500,000,000 impacted by COVID and weather related lower demand. And procurement fell 16.3, reaching €8,400,000,000 As a consequence, gross margin was down 2.2% to €8,000,000,000 also affected negative by €121,000,000 of negative FX impact. Net operating expenses improved by 3.3% to 2,100,000,000 The improvement in net operating expenses is driven by cost containment and efficiency plan. Positive FX impact compensates the €33,000,000 of donations and other expenses related to COVID accounted for in the second quarter. Levies fell by 3.4% to ten fifty seven million euros with lower output and prices in Spain being a key factor to this evolution.
As you can see in the slide, Spanish taxes on generation improved €28,000,000 Analyzing the results of the different business and starting by Networks, its EBITDA fell by 10.6 to €2,300,000,000 considering €65,000,000 negative COVID impact on demand and €140,000,000 of IFRS accounting effects in The U. S. That will start to be recovered from the second half of this year onwards. As you can see in the slide, Spain contributed 34%, The U. S, 23%, Brazil reached 21% and The U.
K. Contributed another 21%. In Spain, EBITDA fell 5.5% to €791,000,000 due to a 50 basis points lower remuneration for this year, bringing down revenues by €29,000,000 and the impact of the mentioned €33,000,000 of positive settlements accounted for in the 2019. Net operating expenses and taxes improved, compensating partially this fall. In The U.
S, IFRS EBITDA was 25% down to $588,000,000 driven by $142,000,000 negative temporary adjustments under IFRS as a consequence of difference in volumes and energy costs due to an extremely mild winter and storms that appeared in the second quarter. Most of these negative impacts will start to be recovered during the second half of this year and following years. U. S. GAAP EBITDA, excluding those accounting translation impacts, decreased just 0.9% or €144,000,000 more than the IFRS EBITDA reported.
In Brazil, EBITDA grew 4.2% to €2,600,000,000 Tariff revisions in Quellba and Concern from April and in Electro from August, increasing contribution from transmission assets and cost contention due to efficiency plans have been almost compensated by BRL 150,000,000 of COVID impact on demand, expected to be recovered mostly in the third quarter of this year. A €1,700,000,000 covenant account as a balance sheet and as an off balance sheet loan for Neoh has all been already approved by AML. Finally, in The U. K, EBITDA was 3.3% up to £431,000,000 with higher revenues both in transmission and distribution as a consequence of the growing asset base due to investments, partially offset by £20,000,000 less revenues due to lower demand to be recovered in 2022. Renewables EBITDA grew 5.3% to €1,200,000,000 driven by the growth in The U.
K. And The U. S. And despite weak conditions in the second quarter. Nevertheless, hydro conditions were good and our level of reserves increased 55% year on year.
Our average operating capacity increased 6.1%, and our total installed capacity reached close to 33,000 megawatts or an increase of close to 8%. In Spain, EBITDA was $3.00 €1,000,000 21% below last year despite an 18% higher output due to 51% higher hydro production as well as higher PV capacity. But this was more than compensated by lower prices in our sales to our supply business. In The U. S, EBITDA increased 12.4% to $313,000,000 caused by a twenty one percent higher output following the seven ninety one megawatts increase in operating capacity and a higher wind resource and higher availability of our fleet.
In The U. K, EBITDA was 54% up to £329 with higher contribution both in Offshore, 12% higher and Offshore, 270% more as a result of the East Of Anglia production, which is ramping up as its seven fourteen megawatts are already in operation. In Brazil, EBITDA decreased 12.6% to BRL $269,000,000, with 7.8% lower output and prices normalizing versus last year, extraordinary high levels. In Mexico, EBITDA decreased 14% to $39,000,000 as a consequence of an 8% lower output. Finally, in the international business, mainly in Europe, fell 3.4% to €177,000,000 due to higher development costs as business expands.
Generation and Supply EBITDA was up 14.3% to €1,300,000,000 including €92,000,000 negative impact of COVID on demand. In Spain, the EBITDA was up 8% to €130,000,000 with 16% lower output, but higher purchases at lower prices versus the first half of last year. We continue our active management of our customer portfolio of energy and smart solutions. There are, as I mentioned, euros 89,000,000 negative nonrecurring from our LNG contract sale accounted for in the second quarter of last year. In Mexico, EBITDA grew 3.7% to $423,000,000 thanks to higher sales as a consequence of an 8% increase production increase, partially compensated by a lower availability of one of our plants.
In The U. K, the EBITDA grew 130% to £112,000,000 after SVT tariff was adjusted upwards. Some COVID impacts on demand are being negotiated to include it on the 2021 SVT review. Brazil added million to the EBITDA in the context of business normalization after the one off negative effect that lowered results in 2019. And our international business, EBITDA was €6,400,000 negative, improving versus last year but still affected by initial development cost of our supply business in Europe.
Nevertheless, we have reached 1,650,000 contracts, €52 more than one year ago. EBIT fell 10.6% to €2,700,000,000 as provision grew 47% after including €71,000,000 of bad debt COVID provisions €35,000,000 in net worth that will be mostly recovered through regulatory mechanisms and €36,000,000 in generation and supply to be managed through our commercial activity. In addition, our amortization increased 7.6% due to the increase of the asset based activity. Delinquency rate measured in our supply business, as rolling credit cost versus billing, has grown from 0.8% in the 2020 to 0.94% in the first half of in the first half due to the COVID impacts. Net financial expenses improved to €111,000,000 to €400,000,000 driven by €182,000,000 linked to one off FX hedges, another 72,000,000 positive impact due to the lower cost of debt that improved 40 basis points to 3.23% and a €43,000,000 negative results due to higher average debt.
As the Chairman has pointed out, our reported credit metrics improved compared to last year, despite of this mentioned debt increase. On a like for like basis, considering homogeneous criteria for debt in both periods, FFO adjusted net debt improved 1.1 percentage points to 21.7. Adjusted net debt EBITDA improved to 3.7 times from 3.8 times and our retained cash flow over our adjusted net debt improved to 20%. Our adjusted leverage ratio was 44.9%. As of today, we maintain ample liquidity of around €14,600,000,000 more than fulfilling the rating agencies' requirements with thirty months coverage of financial need in our base scenario and thirty three months in the stress one.
Our sources of financing continue to be highly diversified. Currently, the bond market is 63% of our sources. Weight of bank financing is 11%, giving us opportunity to increase this kind of funding if required, and supranational lenders have another 11% share. Up to date, the group has obtained €5,600,000,000 equivalent of new funding in different markets and competitive levels, continuing with our green financing strategy. In the bond market, we have issued €2,100,000,000 equivalent, euros 1,100,000.0, $975,000,000 and $560,000,000 reales.
In the bond market, we have raised €1,400,000,000 And as the Chairman has said, we have recently signed a loan with the international investment with the European Investment Bank and ECO and further loans with the Banco Nacional de Desarroyo of Brazil. Iberdrola Group remains the world's leading private group in green bonds issued, the most preferred asset class for ESG investors due to the use of proceeds, strict reporting and external verification. Our current asset base and investment plan focused in the energy transition will allow the group to continue taking advantage of this green bond market. In 2020, Verdola signed new transactions totaling €2,600,000,000 of green financing, maintaining our leading position, as the Chairman has pointed out. The group has a total of €22,600,000,000 of green sustainable financing outstanding as of today.
Reported net profit grew 12.2% to €1,800,000,000 affected by nonrecurring results with Siemens Gamesa capital gain, partially compensated by negative impact on taxes, mainly in the deferred taxes in The U. K, as I explained previously. Adjusted net profit grew 7.5%, as I have detailed in Slide 21. And now the Chairman will end this presentation.
Thank you, Pepe. To conclude, over the last six months, probably in the most challenging scenario in the case, Iberdrola has continued growing. And we have achieved this, reaffirming the same model we have been implementing for twenty years, a model based on social market economy, on a strong belief of the benefit of balancing the long term interest of employees, shareholders and societies at large. In moment like this, everyone needs to move from words to action, and the 40,000 employees of Iberdrola have proven their readiness to do it. Maintaining electricity supply with absolute normality in all our countries, providing visibility to our suppliers so that they can preserve jobs with €7,000,000,000 awarded in just six months, dedicating €33,000,000 to the purchase and donation of health suppliers in the countries where we are at present and progressing in the execution of our investment plan.
Despite all restrictions, we have started the construction of six fifty new megawatts this month. And year on year, we have completed close to 5,000 megawatts, increasing our total installed capacity for more than 53,000 megawatts, almost twothree of which are renewables. We have been able to combine this growth with efficiency measures, driving the net operating expense down by 3.3% and with a strong financial position as shown by all our solvency ratios and our available liquidity with the excess €14,000,000,000 Reported net profit grew 12% to $1,145,000,000 euros despite the negative impact of €553,000,000 as a consequence of COVID-nineteen. For the rest of the year, we are confident that we will continue to perform according to our plans. We maintain our target to invest €10,000,000,000 in the year, installing totally 4,000 megawatt of new capacity.
Results will also be supported by tariff reviews in Brazil and especially about the new rate cases in New York, which we expect to close in October with a corrective effect from April. And we will continue putting in place new efficiency measures. We have lived three months of a sharp contraction in economic activity, but our diversified business model has proven once again our capacity to resist external shocks. These are unprecedented times. And despite seeing clear signs of improvement in power prices, demand and overdue debt, it's still early to be certain about their evolution in the coming months.
As explained earlier, regulators in all our markets are also working on measures to mitigate impact. Taking all this into account, we are today maintaining our net profit guidance at mid high single digit growth with even growing in line with the net profit. We still have significant challenges ahead, but you can be sure that everyone in Iberdrola will continue to rise to the end. Thank you very much. And now we reply your questions.
Now we are going to start with the Q and A session. And the first question comes from Harry Wygut, Bank of America Merrill Lynch Samari, UBS Alberto Gandolfi, Goldman Sachs Emmanuel Palomo, Exane BNP. It is related to the wording of the guidance for the end of the year. Are we correct that there has been a small change of language of the guidance now mid high single digit growth instead of previously high? Is it just the impact of COVID?
Or is there something else driving the small shift? Does the updated guidance meet high single digit growth in net profit include or not the capital gains from Siemens Gamesa stake? Are you downgrading your guidance? Are you comfortable with full year Bloomberg consensus of €3,600,000,000 net income?
So my god, it's too many questions in only one. So when we met already three months ago, we were not aware about the strict lockdown measures which are going to be in place. In April, when we presented first quarter result, we have only a partial understanding of the situation. Today, the situation is different. The COVID, we know now what has been the impact in our accounts.
At net profit level, we represent CHF 153,000,000. 153,000,000 roughly represent 4% to 5% of our annual net profit. So looking forward, the full year, it should depend very much of certain factors, as I comment. What is going to be there are good signs of stabilization of the demand and power prices, but we don't know what is going to be the future evolution depending how is going to be the COVID behavior in the next month. Similarly, I think we are collaborating actively with the regulators.
We expect to recover partially this impact, but I think we are in talks with them. Still, we are not already confirmed for to recover during this year. So that's why I think, in summary, our position is that we continue delivering increased result But depending on the evolution of those factors, we could grow something like a mid- or high single digit. I think the fact today, this CHF 153,000,000 represent 5% or almost 5%, 4% to 5% of our expected net profit. So I think if we recover completely that one, the number should be that one.
We will complete it partially, it should be another one. If we succeed already in the negotiation with regulators to be registered this year, certain of these expenses in the account of this year, the result should be one. If we are not succeeding, if we will register the following year, the result should be another one. So there are too many uncertainties around that it's impossible to say what is going to make. So but what is important is to say that our expectation is to continue delivering increasing results, which I think in the with the uncertainty period in we are living, I feel is really something very, very important to be said.
So there are areas in which we are already is in our hands. I think we are in our hands to increase the power, the installed power. It's in our hands already, almost in our hands to get already the confirmation of our rate cases from New York is in our hands already to reduce already our expenses, but there are areas which is not in our hands. I insist on that one. So I think if any of you, you can guarantee to me that there's going to be another infection, important infection in autumn.
So but I think now we are not sure that, that cannot happen. We have already passed the worst period. And in the worst period, our net profit is growing by 12%. So and that is what I can already tell you
for the time being. FERNANDO Next question comes from Fernando LaFuente, Alantra. What should be the reasonable EBITDA performance for the full year?
FERNANDO Well, I think it's excluding the nonrecurring items you saw, the adjusted EBITDA already grew by 4%. So I think I insist in the same message I insist before. It did now it seems that we are coming back to a gradual normalization after the COVID impact during this quarter. So I think there are positive things, which is New York rate cases, which is going to be already from April, is we are already this tariff will be retracted in April. We are a new megawatt which is going to be put it in operation to reach 4,000.
But I think our feeling is that the EBITDA levels of growth in the year with all those if, if, if, be already in line similar to those one we have already been having in at the adjusted terms during the first half of the year. So that's allowed ourselves to be in the range to middle to high single digit range. IGNACIO question comes from Fernando Garcia,
Royal Bank of Canada. How much of the COVID impact do you expect to recover through regulatory mechanism? What you can repeat, I will Yes. How much of the COVID impact we expect to recover through regulatory mechanism?
So we feel that we are trying to get at least half of this. So I think it's we are already negotiating and the numbers we are already thinking in this moment is to get something like 180,000,000 to €100,000,000 in the during the year. But I think now is that is what we have mainly just negotiated in Brazil in the rate case, tariff review, which is mainly in Brazil and certain things what we expect as well to recover in other countries. But I think that is more or less the number we are expecting, and that is where our the numbers is based.
Fourth question comes from James Rand, Deutsche Bank Jorge Guimaraes, HOTA RE Capital Markets and Jorge Alonso, Societe Generale. Could you provide some details on your expectation from the Brazilian tariff review and whether this should allow a full reset to take into account the volume and bad debt impacts from the crisis?
Well, I think from Brazil, I mentioned in the last opportunity we've already we joined together. I think now Brazil has already approved this, they call, CONTACovi, this loan of for a balanced loan, which for Neo Energia is going to be awarded BRL1.6 billion. We expect that 95% of this amount will be already cashed in by the July 31 and the rest, I think, during August, so I think almost everything in the next two weeks. The tariff review now is under negotiation. The expectation is that this tariff review will be completed during the third quarter.
So I think we don't know it will be August, September, but during the third quarter is the expectation will be ready. And what we are expecting, it will recover all the extraordinary costs incurred, which is some hundreds of million reais in our account.
Question number five is related to position of The U. K. Regulator and it's come from Javier Suarez, Mediobanca Fernando Garcia, Royal Bank of Canada and Martin Young from Investec. The U. K.
Regulator has put out a tough regulatory proposal. Can you please comment on that and your comment to that regulatory document?
RAMON So we have been really surprised and disappointed by your Ofgem draft proposal. It's especially surprising after two years of close collaboration. I think it's a surprise. I think we've been doing two years talking and negotiating with Ofgeen those steps. I think they have already recognized during these two years in our draft of our proposal, they recognize the best investment plan of those of another networks companies.
And until very recent days, Jose has pointed publicly to a rate return around 4.8%, so plus 14 incentives. And suddenly, they modified that one at 3.9 with no incentive or little incentive. I think also, I think this I'm especially as well surprised because this proposal goes against the government priorities and policies. The government priorities and policies is saying that they would like to increase investment infrastructures. And this proposal is reducing investment in infrastructures.
This is already the government would like to increase the need of new jobs, and that is going in the opposite direction. If it's less investment, it's going to be less jobs involved on that one. The government is already the policy is net zero target, and they are trying for this to increase electrification of the economy. With less investment, we are preventing the electrification of the economy. And I think the if there are less electrification, the emission is going to increase.
And all this mess has been generating just because an extra cost for consumer, but less than GBP 1 per customer per annum. So I don't know how in regulated activities, how to mobilize investment required if they are not stability and predictability. The regulatory sector is not a sector you can give surprises, and that is a surprise. So you have to imagine the investment we are making in this is stand for over forty years. So I think we have to take decision for the next forty years.
We've been investing heavily in the last years in the RIIO T1, expecting a continuity in the terms on the condition. Of course, adjusted to the circumstances, but continuity. And therefore, I think if they are not already predictability, I don't know how we can already convince investor to raise money for making already the investment they can't require. I'm sure then it's so strange all we have already happened that we will find out a solution. I'm sure the government of U.
K. Has been very clear about their climate policies and goals, And I'm sure they are going to help already to move in this direction. Trade unions as well, British trade unions are very surprised. They are already calling for a solution to protect the thousands of jobs, not only in our companies and the companies and the suppliers. I think we've been developing during the last eight years a big supply chain with employees, dozens of thousands of people, without putting their jobs at risk.
So and that is reasonable. The trade unions are already worried for what can already happen. So if nothing has changed, I think we will explore, as always we did in defense of the interest of our shareholders, legal action, and we will explore as well the situation ARAMBARRI:] of cutting jobs as well.
Number six comes from Alex Alejandro Vigil, Fignus Stefano Vecchato, Credit Suisse Harry Wybur, Bank of America Merrill Lynch and Javier Suarez, Mediobanca. It's related to Mexico. Regulatory risk in Mexico and investment plans of Iberdrola there.
Well, you know always I said that an energy policy is decided by governments. So I see no doubt on that one. And we have to be already we are in a country, we have to follow the government decision. So far, setting apart of all noise, the only measure which is confirmed with impact to Iberdrola has been the increase in transmission cost for renewables, which, in the case of Iberdrola, has a small impact in our financial result. And I think for which we have already asked courts of injection like the rest of the sector.
Many of those of the sectors has already some of those members, there are no other people of the sector has already received a positive response for the court at this moment, actually. Related to the to our future investment. I think the only plan what we were already in project was planning Tuchsapan. But I think Tuchsapan is we have not still the gas contract. So I think we cannot take the decision up to them, and we cannot secure the gas for the next twenty years.
So when we will have this contract ready, we will decide what to do. But then being nothing has been stopped in this direction. Question number seven comes
from Antonella Bianqueschi, Citi, and it's related to the an update on the forward sales from 2021 for 2021 and 'twenty two in Spain. Paco?
Thank you, Chairman. Well, as the Chairman mentioned during his speech, 100% production for 2020 is of our eligible production is closed above €70 per megawatt hour, as I mentioned during Q1. And 'twenty and for 2021, 90% of the production of hedge oil production is closed at similar prices. Now for 2022, we expect to close our production at similar prices too as the forward curve for 2022 is very in line with the one of 2021.
IGNACIO Number eight comes from Fernando LaFuente, Alantra. Where do you see debt leverage as of the 2020?
Pepe, do you reply? Yes.
I think that we are expecting to be around €39,000,000,000 in debt. Depends also if we finally do the Ifigen acquisition, that will add another €800,000,000 to our debt. And our over net debt will be, in principle, around 21.5% in our calculations and above 18% in the agency ratio in the rating agency calculation, so well into the BBB plus rating.
IGNACIO First thing through, Mickey Becker is asking about the expected evolution of the CapEx during 2021 and 2022.
So as I commented during my speech, we see no reason to change our expectation. Think even in the tough condition we've been living in the second quarter, we have already managed to invest more than in the first quarter, and that is going to accelerate in the second half. I think in the for the detail of the future, yes, I think we will inform to you in the Capital Market Day. But I think just we have already talked about our pipeline. I think we have a huge pipeline.
We have huge opportunities. We have customers ready to sell the energy. We have markets. We have new rate cases. We have people.
So I think now we are making €10,000,000,000 Why not to continue in this line in the future? So I think
we have all the means for already continuing in same direction, but the detail we will provide to you in the Investor Day. IGNACIO Number 10 comes from Jose Ruid Barclays, Harry Wybur, Bank of America Merrill Lynch, Emmanuel Palomo, Exane BNP and is related to our greenfield M and A in Australia. In the last improved offer price last night for Infigen, the final one, if you are successful in your bid for Infigen, would you expect this to have a material accretive impact on earnings? And would this impact your guidance will be in your guidance? The strategy related to the strategy in Australia, if we are just focused on renewables.
Well, the first thing is, as I explained, I think we've been already in talks with this company for the last three months. So I think it's suddenly, somebody makes already a bid for it, And I think we've been forced to reply to this bid. And I think we are in this process. So I think for us, as I mentioned, it's already a significant field in M and A. I think this company, what gave us is the opportunity and the possibility of growing faster in Australia.
We are already doing things in Australia in this moment. We are building 300 megawatt of wind and solar, and that gave us the opportunity of starting with 1,000 megawatt with F in operation plus our 300 plus a pipeline we have already, as I mentioned, of 1,000 or 1,500 megawatts more. So but I think that is, in the short term, that I feel is not already going to affect to our not to our financial solidity nor our result as a whole. But I think it's a good opportunity for future growth for the future years.
Alejandro Richel from Cygnus is asking about the appointment of the new CEO in Atavancreat and the recent withdrawal of 2020 guidance. He's asking Alejandro if which are our perspectives from 2020 and 2021.
Well, Denis Areola is today, I think, is the third day in the company. So I think I gave to him sometimes to know what is in the company, what is the plans. But I think in three days, it's impossible to say things about that one. I think to ask him to take a commitment what is going to be the long term plan, etcetera, I think we have to give some time himself to do so. So I think he is already in the process of finalizing the company in detail, and he's in the process of setting priorities.
And but I think what I can tell you is a guy with twenty five years of proven experience in the sector. So and he has great ideas for Amri. That is the compensation we have already had during this process. We are convinced that Nabron Gri is in a strong growth platform and ensure that after his analysis of the company, he's going to come with good ideas. We do can share with you in the next Capital Market Day in November.
UNIDENTIFIED Next question comes from James Brand, Deutsche Bank and is related to the expectation of the bad debt in the coming quarters, which is our expectation for the remainder of the year. Bad debt in the rest of the year. I mean, expect an increase on it or
Well, I think perhaps, Jupepe, you can reply to that one. I think it's we are already passing very bad times, but I think that is a wave, which Pepe can already reply to them.
Yes. We are expecting, especially in the third quarter, that the and this is obviously in our forecasting and calculations. Obviously, we are expecting that the bad debt will grow during the third quarter, especially as the Chairman was saying, and this is one of the question marks that we have. But we think that by the end of the year, we could have around the double of what we have right now in terms of bad
debt. Jorge Alonso, Societe Generale, is asking about the impact of COVID-nineteen on working capital.
That has improved. In the first quarter, we talked about €700,000,000 and now we are talking around €500,000,000 more or less.
Question 14 IGNACIO from Jorge Guimaraes, HOTAVEY Capital Markets. Regarding the recovery of EBITDA in The U. S, you mentioned from second half 'twenty onwards, could we expect a full recovery still this year? ARAMBARRI:]
About the COVID? No, no, no. We will start in the first quarter, but I think mostly will be in the following years.
Yes. It's similar question, the number 15 from Artur Sidbon from Morgan Stanley and Jorge Lonsso Societe Generale is related to the reconciliable items between U. S. GAAP and IFRS, if we will see a positive impact in our European accounts in the third quarter or will take more
It's the same thing.
Sorry, Pepe, if we can quantify the impact in this half between U. S.
GAAP and IFRS? FRANCOIS will start to recover, especially in the fourth quarter. I think that there could be a positive impact of 30,000,000 $40,000,000 50,000,000 depends a little bit. But most of the impact will be recovered in the next year. So also taking into account that in what the Chairman has said, we are from November, we are expecting to start to in the IFRS to get the results of the joint proposal in New York, which is important in terms of growth.
So I think it will be basically, in the fourth quarter, we'll start to see a significant recovery of the IFRS gap.
Alberto Gandolfi, Goldman Sachs, his question is number 16. Can you please comment on the Spanish national energy plan and the CapEx upside that this could bring for you?
Well, I think I commented during my speech. I think we have already 14,000 megawatt in this moment with permits in the country. And I think in the pipeline, we've kind of already been transformed rapidly in opportunities. We have already thousands of megawatts in construction of in advanced stage for starting construction rapidly. And I think certain that gives an opportunity of acceleration.
I think that is what we are making last year and this year, accelerating and accelerating the construction in Iguan. You have to be aware that all the coal power plant will be closed. Those which are not closed will be closed in the next two years. The nuclear will be most of them closed during the decade as well. So that both together represent almost, call it, matter 50% to 60% of the total production.
So and as sooner that we have already all those things ready, as much as they will be already the supply in the country. That is what we are trying to profit. I think there are certain things which are already helping on this direction. It's the hybridization of the existing power plants. I think we can use the existing transmission with we can hybridize and put in the side the existing power plant another one of renewables.
With that, I already help because it's not needed to build a new transmission infrastructure, a work infrastructure for making that one. So that gives already an opportunity of acceleration of the investment, an opportunity of increasing the investment in the country. The details, November 11.
IGNACIO Number 17 is from Stefano Beccato of this region. It's related in the same topic questioned previously. So it's related to the European recovery fund and the increase in Spain, possible increase in plan of CapEx in renewables. That has been already answered. Number 18 is from Antonella Bianchesi, Citi.
That's your €10,000,000,000 target of included acquisitions. If I'm not wrong, Antonella is asking about the if Infigen and other greenfield M and
A Principally not. I think what we are talking, we are talking about the CapEx, we are making organically. That is not included there. So but I think you know always in the CapEx, are, let's say, a floating amount depending on the level of execution of the investment already going on.
I think €500,000,000 in €10,000,000,000 is not already an important amount, but represented as a whole.
Andrew Mulder from CreditSite asks about the realistic position of the renewable pipeline, if finally, how much we will be able to develop out of the 58,000 megawatts of pipeline.
Well, I think we put already things here very clear. I think it's from the in this moment, we are 7,000 already in construction. So I think that is fully realistic. 14,000, which is with permit. So those one is going to start construction, I've mentioned, some during this year and the rest during next year.
So I think all these two probably will be all of them completed prior of 2023, 2024. And this one with permits in process, I think most of them is will be matured from 2024 onwards. What is realistic? So probably a huge majority. So I think if you see the offshore one, we have the cement.
I think it will depend if we win or we will not win the auctions, which is going to be held. But I think the fact that we have already the cement or we have the land, we have the connection, which is part of this included here, that already give us the opportunity to make it already. You never know that they will have some environmental restrictions of them. But I think our aim is that majority of those ones will be transformed, potentially to be transformed already in a real generation. IGNACIO
Next question comes from Stefano Beccato, Credit Suisse. And is if we can comment on the recent statement from Minister Rivera regarding a possible electricity market reform by year end. Do you believe the current system marginal price model should be changed? And if yes, which model should the government adopt? ROBERTO Well, as far as I know, by President, which she's repeating that in
a model with massive renewables is going to affect already to the fixed with no variable cost, can already affect to the price like it is today. And we have to do something to secure the service and to absorb the fixed cost that the system had. So I think you are aware in this moment, there are certain technologies which are providing this security, is nuclear, which is combined cycle of gas, which are already not a very good, healthy, to use a positive word, of results. So I think but I think those ones are needed. If they are needed, some system have to be introduced.
In order than that, we'll be compensating the manner to maintain this one the activity in those ones. And that is what I understand. The Vice President Rivera, she's mentioning when she talk about that we have to look systems to compensate the fixed cost of the system to provide the reliability than the system require. So I think that is what I can do. What their idea is how to make that one, still we are not really talking about this one.
But I think the aim is to solve this situation.
We have a couple of questions, numbers twenty one and twenty two, regarding the pipeline of renewables from Javier Suarez, Mediobanca and Jorge Guimaraes, Jota Bey Capital Markets. If don't mind, we are going to answer them through the Investor Relations team. So please move to the twenty third questions, and it's coming from Harry Wybur, Bank of America Merrill Lynch and Javier Suarez, Mediobanca. What is your view on the European Union hydrogen strategy? And do you see an opportunity to build incrementally more renewables capacity to power the proposed 40 gigawatts of European electrolyzers?
Is this something that could be relevant in the CapEx plan you outlined in November?
Well, I think it's I was very I've been already in touch with the Commissioner of Energy and with the President, Timmerman, during this confinement period. And I think it's we I was very much expecting what is going to do finally. So the objective of decarbonization in Europe are so clear that there are certain processes which can be electrified, but there are things which cannot be electrified. I think it's easier to electrify the electric vehicles, easy to electrify the cooling and heating of the homes, but it's not easy to make another thing to electrify, for instance, to production of ammonia. So it's a process which require hydrogen.
This hydrogen today is already produced with natural gas. I think they make the process where they kill they call it steam reform, in which they generate CO2, which emit it to the atmosphere, and they are already generating hydrogen. This hydrogen is used already for this process. So that can be transformed. And I think like that one, there are several process for heavy transport.
Same thing as well for heavy transport. Probably, today, still is not the most competitive competitive thing to use already batteries, transport with trucks of a vessel with batteries. But I think probably with hydrogen is a good solution. That's why I think what they already promoted is very easy. All those things which can be already electrified have to be electrified.
The hydrogen has to be used for those processes, which cannot be electrified, but can be already transformed in that one. And but this hydrogen has to generate it using already electrolysis by electrolysis. We know through the use of fossil fuels for production. So I think that is a positive approach. And for that, I think they are seeing that in Europe will be needed on the range of 40,000 megawatts of installed capacity of electrolyzer in this one.
That is a huge amount of electricity generated because it works twenty four hours a day. And that's why we are already aware of that one. And that's why we have already, just in this moment, launching the first largest project of hydrogen with electrolysis to be made in probably in this moment in Europe but certainly in Spain, which is going to generate this hydrogen inside of fertilizer company using the electricity generated for a photovoltaic power plant, which is close to that one. So and that is going and that is what we are trying this moment to expand another one. It's an area we are analyzing in detail.
We are going to see we see that, that is an opportunity, clear opportunity for energy consumption, clean energy consumption in the future. And of course, that we would like to be in the first on the front of this development. But we are already in this moment with a project, which is in Portoriano in Spain, inside of Fertiberia, making already the first electrolyzer, making 20 megawatt electrolyzers, which using already photovoltaic power plant, which are in the neighborhood.
UNIDENTIFIED Let me now ask the last question in Spanish.
How do you assess the recent agreement reached by European leaders?
Sure.
Well, I think that the agreement is positive or very positive rather. Well, for three reasons. Firstly, because this means that the European political project has been consolidated. Those of us that are pro Europe believe that this is a major opportunity because it's the first time that debt has been issued at an European scale at this particular magnitude. And secondly, it represents the consolidation of the green deal as a project for economic growth and for the economic recovery of the EU.
Those of us that have been fighting for the last twenty years in favor of energy transition, it's magnificent news. And then thirdly, because Africa is our country. It's also a very positive move for our country. But apart from the contribution of the 100 and, €14,000,000 that are going to arrive, this, I think, is going to assist us to implement reforms that change our production and management model to become much more competitive and much more sustainable with these €140,000,000,000 So I think it's positive at all levels.
The floor to the Chairman to conclude this event.
So thank you very much for taking part of this conference call. Let me remind that our Investor Relations team will be ready to reply for further information you may require. I hope, take care of all of you. Stay safe and enjoy a well deserved summer break. Thank you very much.
See you in November. Thank you.