Hello, and welcome to Repsol's first quarter 2021 results conference call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO, and a brief introduction will be given by Mr. Ramón Álvarez-Pedrosa, Head of Investor Relations. I must advise you today's conference is being recorded. I would now like to hand the call over to Mr. Álvarez-Pedrosa. Sir, you may begin.
Thank you, operator. Good afternoon, and welcome to Repsol's first quarter results conference call. Today's call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the executive team joining us as well. Before we start, I advise you to read our disclaimer. During this presentation, we may make forward-looking statements which are identified by the use of words such as "will," "expect," and similar phrases. Please note that actual results may differ materially depending on a number of factors, as indicated in the disclaimer. I will now hand the call over to Josu Jon.
Thank you, Ramón. Thank you to everyone joining this conference call. I hope that all of you are keeping healthy and well. Today, I'd like to cover the following main topics. Firstly, a review of the key messages of the quarter. Secondly, the operating highlights and financial results, and thirdly, an update outlook for 2021. With four of our peers also releasing their quarterly results today, I'll make my best to go straight to the main points. Of course, at the end of the presentation, we'll be available to answer your questions. Let me start with the key messages. Supported on a solid set of quarterly results and cash generation, Repsol's performance in the first quarter has continued the positive momentum achieved in the last part of 2020.
More than one year since the start of the pandemic, I think it's fair to say that our industry as a whole, and Repsol in particular, have successfully demonstrated their capacity to navigate through a crisis that still has profound implications in our lives. All business segments deliver a positive operating and free cash flow in the quarter. A weaker refining environment was more than compensated by the recovery of the oil and gas prices, and outstanding performance in chemicals and the contribution of the customer-centric businesses. The adjusted net income reached EUR 471 million, a 17% improvement over the fourth quarter of 2020, and 5% higher than in the first quarter a year ago. Cash flow from operations amounted to EUR 1 billion, 73% higher year-on-year. Operating cash flow covered CapEx interest, dividends, and most of the treasury shares acquired.
Compared to pre-COVID levels, the operating cash flow was 11% lower than in the first quarter of 2019, which had a similar level of oil and gas prices, but a 10% higher production and a refining margin in the $5 range at that time, I mean. Net debt, including leases, stood at EUR 6.5 billion, a EUR 0.3 billion reduction compared to December. Excluding the effect of the hybrid bonds issued on repurchase during the quarter, the net debt was in line with the end of 2020. Let me highlight that Standard & Poor's and Fitch recognized Repsol's financial strength, reaffirming their credit rating at BBB with a stable outlook. We deliver on our remuneration commitment for January 2021, following the implementation of our buyback program to purchase and redeem the shares issued with the January strip.
A total of 38.9 million shares were purchased in the quarter, and the remaining 1.5 million shares have been bought in April. The share capital reduction was executed in April, resulting in a final share capital of 1,527 million shares. Going forward, dividends will be fully paid in cash. Given the slower recovery of Europe's and Spain's economies, we remain cautious in the short term, but Repsol is already working in its transformation. We are accelerating the investment in low carbon and progressing on the decarbonization of our industrial assets. In the first quarter of 2021, 40% of our CapEx was deployed in low carbon platforms. Aligned with our strategy, the upstream division is one of the cash generators that finances this transition, maximizing value generation while getting ready to benefit from higher prices, thanks to the flexibility of its portfolio.
Looking now briefly to the macroeconomic environment of the quarter. Brent crude averaged $61, 38% higher quarter on quarter, and 22% above the same quarter a year ago. An improved outlook for oil demand, together with the extension of our production cuts, supported the recovery of prices through the quarter. Henry Hub averages $2.7 per million BTUs compared to the previous quarter and 35% higher than in the same period of 2020. Driven by the strength of most regional gas references, Repsol's realization gas price rose to $3.4 per thousand cubic feet in this quarter, 26% higher than in the fourth quarter of 2020, and 42% higher than a year ago. In refining, the margin indicator decreased quarter on quarter, negatively impacted by the higher energy cost due to the Brent price that offset the stronger gasoline spreads.
Let me now review the main operating highlights of the quarter. The upstream business benefits from better prices, lower costs, and unstable contribution from Libya. Organic free cash flow amounted to EUR 0.5 billion, 86% higher than in the same quarter a year ago. Production continued to be managed with a flexible and value-focused approach. Quarterly volumes averaged 638,000 barrels of oil equivalent per day, a 2% increase quarter-on-quarter, and 10% below a year ago. Year-over-year, volumes were negatively impacted by the weather issues in Eagle Ford, maintenance activities, and the natural decline of fields. These impacts more than offset the higher production in Libya, Bolivia, and Venezuela. Libya contributed 37,000 net barrels per day, compared to an average of 6,000 barrels per day in the same period a year ago. Although the environment is complex, there have been positive signs of stabilization in the country.
Our budget expects an average production of 36,000 barrels per day in 2021. The upstream CapEx in dollar terms was 14% higher than in the fourth quarter of 2020, increasing the capital intensity per barrel produced, thanks to our capacity to accelerate investments in a higher price scenario. OpEx in the upstream were 21% lower than in the first quarter of 2020. Even compared to the average of the last three quarters of 2020 that were impacted by the pandemic and the resilience measures, OpEx were 5% lower. Our leaner and more focused exploration strategy delivered another significant discovery in the Boicobo Sur well in the Caipipendi block in Bolivia. This discovery added one TCF of new gas resources to what already is a profitable producing asset.
Development activity remained focused on the 14 key projects that we expect to put on a stream within the horizon of our strategic plan. In Norway, the redevelopment of Yme completed the successful installation of the drilling and production unit. First oil is expected in the fourth quarter this year. In Alaska, the development of Pikka keeps moving ahead. The operator expects the Final Investment Decision by the end of the year, with first oil projected by 2025. We are working together with them in finding a new partner to step into the project. In Indonesia, the development plan for Sakakemang was approved by the government, allowing us to monetize the recent exploration success. FID is expected by the end of 2021 or the beginning of 2022, with first gas two years later.
In Brazil, the partners of BM-C-33 license approved the development concept of this important gas and condensate field. Let me now continue with the operating performance of the industrial business. Despite the challenging refining scenario driven by a weak demand for petroleum products, this division was able to generate a positive free cash flow of EUR 0.1 billion in the quarter. Starting with refining, our margin indicator averaged EUR 0.20 per barrel, which compares to EUR 1 in the fourth quarter of 2020 and EUR 4.7 a year ago. The premium achieved in the CCS margin was EUR 0.60 over the indicator. Year-on-year, margins were negatively impacted by narrower middle distillate spreads, tighter heavy crude spreads, and higher energy costs. The relative strength of heavy crudes weighs against complex refiners like Repsol. The utilization of our distillation and conversion units was 76% and 82% respectively.
This was a modest quarter-on-quarter improvement. Still below the utilization rates of the first quarter of 2020. The chemicals business remained resilient through the crisis, delivering an exceptional quarter that was supported by high margins, superior utilization rates, and stable sales. International margins of intermediate products and polyolefins reached their highest levels in decades, driven by a solid demand, the disruption in the Gulf of Mexico, and supply restrictions in Europe. Higher product prices more than compensated the increase in the price of the feedstocks. During the quarter, our chemical business completed its third sale of Repsol's propylene oxide, styrene, and polyols technology license for the construction of new plants in China. Moving now to commercial and renewable. Starting with mobility.
Sales in our service station in Spain were 14% lower than in the first quarter of 2020, reflecting the impact of mobility restrictions due to COVID-19 and the effect of the Filomena storm. Remember that Filomena was the largest snow storm we have experienced in Spain, mainly in the high plains area, affecting hardly to Madrid over the last century. Compared to pre-COVID levels, sales were 22% lower than the first quarter of 2019. After quarter closing, we reached an agreement to divest our Italian service stations network and direct fuel sales business. This transaction will allow us to focus on the geographic areas where we have the greatest competitive advantage. In retail, electricity and gas, Repsol acquired a majority stake in Gana Energía, a company with 37,000 clients that operates online and markets 100% green energy.
With this acquisition and the organic growth in the quarter, we currently have more than 1.2 million clients in this business. The lubricants, asphalts, and specialties business had another solid quarter, improving its sales compared to the first quarter of 2020. In renewables and generation, the electricity generated by Repsol was 23% higher than in the first quarter of 2020, thanks to the startup of Delta. Remember that Delta is the wind production in Aragon, the northeast part of Spain, and a higher contribution from Hydro. Kappa, our first solar farm in Spain, in the southern high plains in Ciudad Real, with 126 MW of capacity, is starting operations, and in the next weeks will receive final administrative authorizations. We keep on working on the development and construction of the rest of the projects in our portfolio.
In Chile, our JV with Iberdrola signed a 14-year PPA for the development of the Atacama wind project, guaranteeing double-digit profitability of this asset. Repsol signed a PPA with Microsoft to supply renewable wind and solar power to their operations in Europe. This agreement expands the collaboration between both companies to accelerate digital innovation and energy transition. Aligned with our strategic objective to explore either an IPO or finding a suitable partner for our renewable business, we are taking the necessary steps for the proper rearrangement of our corporate legal structure. At this point, I want to take you briefly through the progress in the energy transition and the transformation of our portfolio. In Cartagena, southeast part of Spain, procurement work has started ahead of the development of the new Ecoplant that will start operations in 2023.
In our Petronor refinery in the north part of Spain, engineering work has started in the 10 MW renewable hydrogen plant. In Tarragona, northeast, Repsol has joined Enerkem and Agbar to build a waste-to-chemicals plant. In this plant, we will transform 400,000 tons per year of urban waste from the area in more than 220,000 tons of methanol from renewable plastic or advanced biofuels. In Puertollano, we will build the first plant in Spain to produce chemically recycled polyurethane foam. This facility will be able to treat around 2,000 tons of waste per year and will be under operation in 2022. In customer centric, we continue adding new energy services with a multi-energy approach, offering comprehensive solutions in mobility and adding products and services at home for our customers. In Iberia, Repsol opened its first ultra-fast charging point in Portugal.
In Spain, we continue expanding our recharging network with the ambition of reaching more than 1,000 charging points in our service stations. Finally, within the framework of the Next Generation EU, Repsol has a portfolio of more than EUR 6 billion in projects associated with the energy transition for the 2021 to 2026 period that could be candidates for the next green funds. Let me now review the financial results. The group's adjusted net income was EUR 471 million, which compares to EUR 447 million in the same period a year ago. By division, the adjusted net income of the upstream was EUR 327 million, EUR 237 million higher year-on-year, mainly due to higher realization prices, lower costs, and lower amortization rates. In industrial, the adjusted net income was EUR 73 million, which compares to EUR 288 million a year ago.
Reduction mostly driven by refining and Peru, partially offset by the strong performance of the chemical business. The result in commercial and renewables was EUR 101 million, EUR 20 million lower than in the same quarter of 2020, primarily driven by mobility and LPG. In corporate and others, the adjusted net income was a EUR 30 million negative, a EUR 22 million improvement over the same period a year ago, mostly due to higher results from derivatives, from treasury stock positions. The group's EBITDA CCS stood at EUR 1.4 billion in the quarter, 4% lower year-on-year.
For further detail on Repsol's results, I encourage you to refer to the detailed documents that were released this morning. Looking now at our updated outlook, we are increasingly optimistic on the macroeconomic scenario for 2021, but we remain under resilience mode until we have clear signs of the end of the mobility restrictions and effects of the pandemic.
In the upstream, we have increased our CapEx budget by 10% in 2021, with a focus on increasing activity in unconventionals. We expect to start drilling in Marcellus and Eagle Ford by mid-year after bringing one rig to each asset. The flexibility of our portfolio will allow us to select the best targets with a short payback to benefit from sustained higher price scenarios. In chemicals, the fundamentals of the first quarter have continued in April at the same level we saw in March, and we have raised the full-year expected contribution of this business being in April. In refining, the margin indicator has averaged $1.2 per barrel in April. We now expect an average full-year refining margin indicator of $2 per barrel. There is the mathematical effect of the delay in the exiting process of the pandemic.
This increase of the margin, from our point of view, is going to be helped by the gradual recovery of demand and the adjustment of overcapacity in Europe during the second half of the year. Our expected full year EBITDA CCS increases to EUR 5.8 billion. As a result, and I underline this fact of higher oil and gas price assumptions and stronger petrochemical margins, partially offset by the lower refining margin indicator. CapEx remains unchanged at EUR 2.6 billion as the higher investment in unconventionals will be largely offset by other moving parts in the portfolio. Lastly, let me update you on the arbitration proceeding with Sinopec in connection with the purchase in 2012 of 49% of the shares in Talisman Energy UK.
On 20 April 2021, the arbitration tribunal has issued a new partial award in connection with the four issues pending resolution in the liability phase, dismissing Sinopec claims on three of the claims: decommissioning, projects, and maintenance. Finding Talisman liable in relation to production, that in some ways overlapping with the previous award related to reserves. After this award, the arbitration proceeding will continue to the quantum phase. The new award is under analysis internally and with external counsel. Our preliminary view is positive. The award dismissed most of the claims and allow us to outline with more clarity the potential consequences of the conduct of Talisman Group, limiting our risks. Once we have concluded our analysis, we will review the current accounting provision, which presumably will result in a reduction of the amount initially registered.
To conclude, our solid performance in the first quarter of the year has brought us one step closer to pre-COVID normalized levels. The resilience of Repsol's integrated model has allowed us to deliver a strong set of results and a positive operating and free cash flow contribution in all our segments. Downstream is not just refining. The exceptional performance of chemicals and the contribution of the customer centric, even with this one-shot event I related before, Filomena, that paralyzed mobility for two weeks in a main part of Spain, is allowing us to navigate what still is a challenging refining demand scenario. Upstream is performing aligned with our strategy, working in agile and focused mode, reducing costs and maximizing cash generation while getting ready to capitalize on higher prices.
We continue maturing the projects that will concentrate our E&P investment during the horizon of our strategic plan, with most of the FIDs coming in next 24 months. The development of our renewables pipeline remains on track. By year-end, we expect to have 710 additional MW of capacity in operation or advanced stage of construction. This includes 517 MW in Spain and 193 MW in Chile, corresponding to a 50% stake in the JV we have with IberEolic. The transformation of our industrial assets is ongoing. Advanced biofuels and renewable hydrogen will play a key role in the future of this division. Looking into the rest of 2021, we will maintain a prudent capital allocation policy, even though our revised macro outlook has allowed us to improve by 10% the expected full-year EBITDA at CCS and operating cash flow generation.
With that, I now hand the call back to Ramón, who will lead us through a question and answer session. Thank you very much.
Thank you very much, Josu Jon. In case you run into technical problems, please contact us through our email address, investor.relations@repsol.com, and we will contact you immediately to try to solve it. Before moving on the Q&A session, I would like the operator to remind us of the processes to ask a question. Operator, please go ahead.
Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Star and one to ask your question.
Thank you, operator. Let me now move to the Q&A session. Our first question comes from Irene Himona at Societe Generale.
Thank you very much. Good morning, Josu Jon. Two quick questions, please. Libya, can you say what the contribution was to your upstream EBIT, please, in the quarter? Secondly, you mentioned refining margins so far in Q2. What are you seeing in terms of oil product demand and oil product sales in April, please? Thank you.
Thank you, Irene. First of all, going to Libya, let me say that in terms of production, the average has been at around 36,000 barrels per day, and the estimated EBIT in the whole quarter has been more or less EUR 24 million . I'm going to check the figures with our team, but I think that they are more or less there. Going to the refining margins. We are seeing a slight recovery of demand in April comparing with the first quarter. More or less, the first quarter, we have experienced a 23% of total reduction of the demand in Spain. What we are seeing in April is that the figure could be at around 21% in service stations in Spain and 18% in Portugal.
I'm comparing with 2019, of course, because you know, Irene, that comparing with 2020, taking into account that we were confined at that time is a nonsense. Comparing with 2019 figures, there is a slight recovery, and we are seeing, of course, this recovery in a clear way in margins. Still, we have a low margin, $1.2 per barrel as a margin indicator in April. There is an important milestone in the coming days. Of course, I don't have full clarity about that. On May 9th, the alarm state that was declared six, seven months ago by the Spanish Parliament is going to end. It seems to me that the restrictions, in some way, we have experienced and suffered, because of the pandemic over the last months, are going to be clearly easier from this day on in Spain.
I think that we are going to see, and we are prepared to experience a clear demand increase in case of seeing in the coming weeks this restriction easing process and a demand increase as we expect due to the end of this wave of the pandemic that is in some way overlapping with the vaccination process. The EBIT figure, Irene, was EUR 140 million in Libya. Excuse me. It was my mistake. I was checking a partial month figure. EUR 140 million. Going to your second question. We are seeing and expecting a clear demand increase in the coming weeks as a consequence of the end of the restriction. In some way, we are still prudent. The game is not fully over but after one year, I could say that Repsol has overcome the worst of this pandemic, and we are prepared to recover and to go on in our growth process. Thank you, Irene.
Thank you.
Thank you, Irene. Next question comes from Oswald Clint at Bernstein.
There's always lots of rumors around your proposed transactions, the renewable IPO, the customer-centric business. I know the rumors tend to be 80%, 90% wrong, but I wonder if you could just update us on your intent to execute those particular transactions, say, within the next 12 to 18 months, please. Secondly, just on unconventional CapEx, the Marcellus and Eagle Ford. Of course, gas prices in the U.S. are not as high as international, and others are adding rigs into the gas plays as well. Could you outline what are those payback periods you're assuming? What happens if gas was to perhaps pull back to mid two levels or even below two and a half dollars per MCF? Would you scale back that CapEx again? Thank you.
Thank you, Oswald. Going to your first question, let me again underline that what I announced last time, eight weeks ago, presenting the fourth quarter results, was that we are going to launch an IPO, alternatively find a sustainable partner for our renewable business. We still have 13 months ahead to take a final decision, fitting with our commitment. The rationale of this decision is mainly to have the right vehicle, a clear visibility of the low carbon business, and decreasing the cost of capital of the company. That is the rationale we have behind this decision. It's nothing related to the moment that renewables are living and nothing to do with the market current situation. We have no rush to launch an IPO or find a partner. We are analyzing the process.
We are in talks with potential partners and so on. We will take a final decision once we decide it is the best moment to do so. Our target is not divesting. It is, first of all, having the right vehicle with low cost of capital to grow. Secondly, to push, to foster, to enhance the growth in this business that is going to be important and core for Repsol. In the case of the customer-centric business, let me say as well, that we are always monitoring the market in order to search for inorganic opportunities that could be beneficial for our shareholders. In this approach, we have sometimes evaluated the possibility to sell a minority stake in our customer-centric business. I'm going to be very clear.
We are only to consider this option if a potential partner has the capacity to add value to the current Repsol customer-centric business proposal. Let me say, that is not going to be an easy task. You know that we have a strong position as Iberian energy leader with a high growth power customer business with more than 24 million customers and a strong brand, a good reputation, and a growth project. We have the expectation to grow up 40% in the EBITDA of this business by 2025 compared with 2019 levels. It's not easy to find a partner to improve this pathway. In any case, we are always, because it's our duty, analyzing the market. Let me say that in this case, it's going to be harder than in the first one. Going to the Marcellus.
First of all, the payback is around 3.5 years if we take this increase we are going to have. Secondly, I know you know that as well, in Eagle Ford, we have mainly liquids. Two-thirds of the production at 70% is either oil or condensate. In the case of Eagle Ford, we have a clear exposure to liquids that increase the economics. In the case of Marcellus, you are right, it's dry gas. The drilling in the Marcellus is going to be the year of the increase. We are going to have in CapEx terms at around EUR 48 million, EUR 50 million. I hope that I'm giving you the right figure after the mistake. Sorry again, Irene, talking about Libya. Going to the break-even, we are comfortable in cash terms because it's slightly below EUR 2 per million BTUs.
We have in the new drilling process, we are going to expose, we are comfortable in break-even terms. Of course, working, exploring, and in this case, increasing CapEx has always some risks, but we are quite comfortable taking into account the expectation for this gas price, taking into account the payback, and taking into account the low break-even in cash terms of the new production we are going to drill in this campaign from June on with this new rig. Thank you as well.
Thank you as well. Our next question comes from Biraj Borkhataria at Royal Bank of Canada.
Thanks for taking my question. Two, please. The first one's on chemicals. When I look at my model, it looks like one of the best results in several years. I was wondering if there's anything unusual in there or anything you can call out that was driving that significant improvement, or is it just a broad-based chemicals recovery there? The second question is on working capital. I think last year you talked about one of the strategic initiatives, and one of them was to reduce working capital to help protect the balance sheet. How should we think about that into 2021? Have you baked anything into your net debt guidance for this year? I would have thought with higher commodity prices, you might have a bit of a headwind there. Any comments on that would be helpful. Thank you.
Thank you, Biraj. I was checking some days ago, I think that this Monday, Tuesday, the tracking we have internally of the chemical internal index, that is related to the international margin and our own units from 1991 on. That is the tracking we have. March, and let me say April, are the highest numbers, the highest figures in margin terms in the series we have in Repsol. What is in some way behind. It is true that even in 2020, with consumer goods, the automotive sector, construction, negatively impacted because of the COVID, the petrochemical demand kept globally steady, sustained by applications like packaging, healthcare, and so on. It is true that in 2020, we are seeing a clear demand growth that continues to provide a support to the market, with certain recovery in some of those sectors that were more negatively, in some way, impacted in 2020.
We have to add that this quarter we are seeing some supply constraints due to production and logistic issues in the case of the chemicals in the Gulf of Mexico in January. You remember the weather problems they had and so on. In some way, I think that the maintenance in some crackers and so on is also impacting in a positive way. Our perception is that performance in this business is expected to continue, at least in this, throughout the second quarter. It will be quite rational to expect a small decline in the third quarter as supply-demand balance normalizes. As I said before, we are seeing a clear result tracking in Repsol. In April, we are, in some way, fitting or overcoming the full expectation we had for the whole 2021 year.
I don't know what is going to happen, but let me say that even seeing the end of this restriction, the second half, it seems to me that it's going to be a good second half for the chemical business. Going to the working capital for the whole year, it seems to me that decoupling any and excluding any price effect, our expectation was to have a EUR 300 million increase in working capital over the whole 2021 year. More or less, EUR 100 million, EUR 150 million could be related to the upstream, mainly Venezuela. I mean, EUR 150 could be related to downstream activity, receivables, a part of the stock recovery we had at the end of December that was very low, and so on.
On top of that, we could expect, being at EUR 60, EUR 64, EUR 65 per barrel at the end of the year, in that case, perhaps you have to add EUR 500 million, maximum EUR 600 million to this working capital due to the price you need to sustain your inventory. From EUR 300 million, that will be the figure at EUR 50 per barrel at the end of the year, and something close to EUR 800 million as the total working capital increase over the whole year in any scenario, putting the end to the year in a range of EUR 62, EUR 65 per barrel, more or less. Thank you, Biraj.
That's very helpful. Thank you.
Thank you, Biraj. Next question comes from Michele Della Vigna at Goldman Sachs.
Josu Jon, thank you very much for the presentation. Two quick questions, if I may. On the tax rate, what should we expect in a normalized environment as your downstream business recovers? Is it still fair to assume something between 35% and 40%? Then finally, on your commercial business, is it fair to assume that as the restrictions start to ease and traffic comes back into the summer, that we could assume that the EBIT would go back to the EUR 200 million plus per quarter, perhaps starting from Q3? Would you find that a reasonable modeling assumption? Thank you.
Thank you, Michele. You know, more or less, all in all, in our downstream, the average tax rate is around 25%. In the case of the upstream, I think that this quarter we have been in 45%, even having a bit more Libya, because we also had more North America and so on. All in all, we have been in 45%. It's true that because the weight of the results in the P&L of the upstream has been higher in relative terms, comparing with the downstream, because the situation in the refining business and so on, we have been close to 40% in the total figure as an average in the first quarter. Taking into account, let me say, a more normalized year, I see that we could be closer to 33%, 35% in case of having a more normalized downstream.
Of course, that is going to be the weight of every business in the tax basket. Let me again underline what happened in Spain in January, because we not only experienced a restriction in mobility for two weeks. Even the non-oil business in the main part of Spain was not selling in a normal way because there's no term we suffer in January. All that, of course, added to the restriction mobility in the commercial side, has impacted this quarter in this business. In any case, I think that we are going to see a clear recovery of this business in this quarter. The easing of restrictions is going to be clear, and in some way, the customer-centric business in next quarter could have more or less an average. In the whole year, we could have an EBITDA, more or less, of EUR 900 million.
In a normalized quarter, and I think that next quarter is going to be quite normalized in the customer-centric area, we could be close to EUR 250 million of EBITDA. An EBIT that could be something in between EUR 150 million and EUR 170 million. I think that things are going to be clearly better after the end of the state of alarm from May on, Michele. Thank you very much.
Thank you.
Thank you, Michele. Next question comes from Thomas Adam at Credit Suisse.
Hi, guys. A couple of questions going back to commercial and the renewable business. Just on the commercial, to clarify. You've mentioned just now that any potential partner will find it really hard to add value. The fact that you started the process, to me, suggests that you were looking for a good valuation, which you then clearly didn't get. I guess my other question would have been, why do you need the proceeds for the commercial business, considering you can't really grow in Spain? You've got a very strong position there, unless the intention was to use the proceeds to maybe add another geography in renewables. Just a little bit not sure about how to read your activities in the commercial business. Secondly, maybe just on the renewables.
You said you're not in a rush right now, obviously, since you last spoke was the full Q results, maybe you can at least provide us with a progress report over the past two to three months. What have you learned? Are you incrementally more positive about the process or not? Thank you.
I mean, I'm going to be very clear. We don't need the proceeds of any divestment coming from the customer-centric business. Saying that, it's true that, in case of seeing, let me say, enterprise value, EBITDA proposals or offers above 11x, 12x, in that case, I have to rethink what I said some seconds ago. Saying that, Thomas, in case of having a partner, and as I said, that is not going to be an easy task at all. It's not today our central scenario. We need someone ready to add capabilities to our business. To grow in some way, to fulfill in a better way the strategic plan we have and so on. In the case of the renewable business, let me say, first of all, that we are delivering what we said. Every step we commit, we are delivering to the market what was our commitment.
Secondly, we are building the business. We are building the capabilities to manage this business. Today, we have a reputed team that is already a reference in the market. Secondly, we are working internally in terms of carve-outs, legal entities and so on to prepare this business to have the right vehicle in financial terms to foster the growth of this business. That is going to be quite similar in both cases. For the JV with a potential partner or the IPO. In some way, we are working, finding the right partner for this business. The IPO is an option.
Let me say, a combination of both is also an option, because perhaps we could have a partner that could, in some way, help us to build this vehicle with a lower cost of capital, preparing together the IPO that at the same time, in the midterm, in the long term, could be also an exiting way for this potential partner. We are working on that. At the same time, we are progressing the right way. As you have listened some minutes ago, we started the operation in a new plant this week in Kappa. We are also improving the mix of the merchant and PPAs position of our business to have, in some way, a more clear expectation of future cash flows coming from this business. What we did with Microsoft related to our Spanish assets, it goes in that direction.
Same thing in Atacama, in Chile, that thanks to the PPA we signed, I think that's coming, 14 years, is guaranteeing the double-digit return for the equity position we have in this wind farm in Chile. What we are building in some way are the capabilities to have a competitive, a profitable business that, in some way, is going to need, and that is what we are looking for now, the right financial vehicle to improve the cost of capital of this business to compete in a better way. Thank you, Thomas.
Perfect. Thank you.
Thank you, Thomas. Next question comes from Alastair Syme at Citi.
Thanks for that. Josu Jon, can I just get you to comment on refining? The low margins are clearly a signal for the industry to rationalize capacity. Then you've got this higher forecast later on in the year, which I guess is consistent with the end of lockdowns. I'm wondering if that's going to end up with the industry rationalizing enough capacity if that scenario happens. I'm just interested in your perspective. Then can you talk specifically on your own refining portfolio, what you were doing, because there has been some press around temporary shutdowns, for instance, in Petronor. They do seem to be midterm temporary shutdowns, if that makes sense. That's all I had. Thank you.
Thank you, Alastair. First of all, let me say that our five refineries are in the first quartile of European competitiveness, in a normal situation. Remember that even in 2020, when we take in the published figures, European refineries, more than a half of them had a negative net cash margins and all of our five refineries in Europe, they were in the positive side. It is true that we are seeing and experiencing a quite unusual situation in our market. The pandemic, the mobility restrictions, they have impacted in a dramatic way on some factors that are important, even in relative terms, for a refining system. First of all, the lack of jet sales in the world is impacting in a very negative way on the situation and the spreads of the middle distillates in the world.
You know that we have a system that is, in some way, very related to the middle distillates production and less exposed to gasoline. What is an advantage being in Europe, in a normal situation, in this pandemic, has been in some way, in relative terms, a differential negative competitiveness for our system. Secondly, we are more exposed to the spread of the discount, better said, of heavy oils. Because the restrictions in production that OPEC and some other companies are enforcing, are complying due to the drop of demand in the world, the restriction of supply of this crude oil is higher than for some other alternatives, and that is impacting also in a negative way on our systems.
Thirdly, due to the drop, because the restrictions in our hinterland, Spain, Portugal, France, that is also part of our hinterland, and so on, we are changing some positions that are CIF for us with higher margins by FOB positions with lower margins for our system. These three effects are impacted in a negative way that is slightly recovering, but we are not still there because we are waiting for the end of the mobility restrictions, and that is impacting in a temporary way, and opening the door to shutdowns that are temporary, that are affecting three of our refineries. Petronor in the north part of Spain in Bilbao, Puertollano in the High Plains, A Coruña. In some way, we are prioritizing the continuity of our operations.
It's true that due to this demand drop, we are taking this kind of temporary shutdowns and temporary layoffs in our refineries with the target of improving the efficiency and increasing the competitiveness we have. We expect that in some weeks or in a few months, this situation could be recovered, because in competitiveness terms, we have a refining system of five refineries that are in the first European quartile. They are not threatened in any scenario, where 25% of European capacity could be shut down in coming five, six years because a lack of competitiveness of European refining. We are going to be there. We are going to be operating. Our duty in the meantime is, of course, protecting our P&L, protecting our assets, and investing to transform them and to have a more competitive refining system. We are doing that.
Remember that we have in our strategic plan the target of reducing that 25% of CO2 emissions of our refineries with a higher production of eco fuels, reduction of energy costs, circular economy, and so on. We are taking advantage of this time to accelerate this transformation to have after the recovery that is going to arrive, and is going to arrive probably soon, to have a more competitive refining system. Thank you.
Thank you, Alastair. Next question comes from Alessandro Pozzi at Mediobanca.
Yeah. Good afternoon. Thank you for taking my questions. I have three. You raised guidance on EBITDA by 10%. I was wondering if you can have a bit more color on the various moving parts there, thinking about what oil price that you are using for this year, but also the impact of the petrochem on the new guidance. The second question is on recovery funds. I believe in Spain, government approved the new recovery fund, I was wondering how that could help Repsol investing in energy transition, especially, I believe there are funds allocated for hydrogen as well. I was wondering how you can benefit from those. Final question is, you tweaked a little bit of the capital allocation, increasing CapEx in the upstream against maybe with lower in industrial.
I was wondering if refining margins also are coming up in the second half, is it the right time maybe to increase the absolute level of CapEx? That's all for me. Thank you.
Thank you, Alessandro. First of all, going to the EBITDA. All in all, we are giving a guidance where the EBITDA of the industrial business is going to stay at the same level. In some way, the petrochemical improvement is going to offset the reduction of the EBITDA coming from the refining, because we are also moving down the refining index margin from the former $3.5 per barrel we had for the whole year for 2021 to $2 per barrel now. Taking what could be challenged some weeks ago, but today I think that is a proven approach of an EBITDA at around EUR 700, EUR 750 million for the petrochemical business for the whole year. We are offsetting in some way the effect coming from the EBITDA reduction because the pushing the refining margin index down.
The EUR 500 million that we are improving in terms of EBITDA, all of them, they come from the commodity prices. What we are taking in this guidance, comparing with the USD 50 per barrel Brent and USD 3 per million of BTUs in terms of Henry Hub, what we are taking as assumption to give you this guidance for the whole year is around USD 60 per barrel Brent as average for the whole year and USD 2.8 per million of BTUs in terms of the Henry Hub. Going to the recovery fund, of course, we are going to be there. We have projects that all in all, they account for EUR 6.3 billion to invest in coming years that are related to this Next Generation EU. The main target we have, thanks to this public support, we can accelerate projects.
Even in some cases, we could develop projects that currently perhaps don't meet our expectation in terms of profitability because they are technologies that are not fully mature now, but thanks to this public support, and not only in CapEx terms, in some way it could come in regulatory terms, for instance, the electricity cost for the hydrogen production and so on. Thanks to that, we are going to be able to accelerate some projects, to develop these projects, and to have a privileged position as Repsol in the hydrogen market. That is very important for us because that is the seat of the future of the industrial sides of the company, circular economy and hydrogen market.
We can't forget that Spain is going to be the main European player in terms of hydrogen, because the renewable production we have in the country and so on, Repsol is going to be the main player. We are today the main Spanish consumer in hydrogen terms. We operate today in Cartagena, the largest hydrogen plant in Europe. On top of that, we are starting to analyze and build new markets for Repsol. That could be the industrial seat, that could be electricity storage, that could be in some way the substitution of domestic natural gas, and even for some kinds of mobility transport fuels. All that is going to arrive. Repsol is going to be a player. We have competitive advantages to be there.
Thanks to this Next Generation EU programs and funds, we are going to have the capacity to accelerate this position we could have. The organic CapEx of the year. More or less, the total CapEx of the year is going to be at around EUR 2.6 billion-EUR 2.7 billion. We are more optimistic about the future. Let me say that today, of course, with all the concerns, because the pandemic is still there, the view I have is more positive than the view I expressed and transmitted eight weeks ago when we presented the fourth quarter result. It's true that we are still in resilient mode. We are going to be prudent. We are going to wait to see the end of the tunnel. Of course, we are going to analyze some other opportunities that could appear.
Even in a small, in some way inorganic, small projects or acquisitions that could accelerate the transformation of the future, always in a prudent way. I'm not talking about large acquisitions and things like that. We are paving the way to have a framework where this excess of proceeds we could expect in coming months, in coming years, could accelerate the transformation of Repsol, building this 2025, 2030 year company that is going to be profitable, but at the same time, less carbonized. Thank you.
Thank you, Alessandro. Next question comes from James Hubbard at Deutsche Bank.
Morning. Thank you. I've got two questions. Your guidance for net debt on your new macro assumption is less than EUR 6.8 billion at the end of the year. I think, and correct me if I'm wrong, it was the same guidance when you were using $50 a barrel. I'm wondering why you don't expect that net debt to fall a bit more. Is it just loss to working capital in the weak refining in H1? That's the first question. Second question is, the Sakakemang projects in Indonesia. I believe that is your carbon capture project. Again, correct me if I'm wrong. Assuming it is, I'm wondering what's happening to the CO2.
I'm assuming, and maybe wrongly, that there's no carbon market in Indonesia and the government offers no incentives for people to not emit CO2, especially given what they do to their forests every year. If that's the case, what's happening to the CO2? Is this like charity? You're doing it to be a good corporate citizen, or is there a commercial use for the CO2 that you found? Thank you.
Thank you, James. You are right. We are not changing our guidance. When we say below or less than EUR 6.8 billion, it is true that it is not going to be exactly the same figure. It is going to be below the figure we had in the last presentation. In some way, in case of seeing, as we said before, these guidances, in case of seeing this recovery of the refining margin and so on, I think that we have some small room to increase in some way the CapEx, even in organic way, in this transformation process of the company. In any case, my guidance by the end of the year is to have our net debt below EUR 6.8 billion.
In case of having more proceeds, in case of having the beat down the cash flow from operation we could expect in a better scenario, we are going to be a beat room to perhaps invest a bit more, either with this flexibility we expressed before in the downstream or in a small pushes in this low carbon transformation. We are, of course, analyzing many potential opportunities, and in case of seeing, let me say, something more material, I will deliver to the market. In any case, I also want to stress the fact that another way to be, before the end of the year, below this figure of EUR 6.8 billion, is being less exposed in financial terms to the emission of what is taking into account the current debt we have today, that is EUR 6.5 billion.
I think that we are going to be there, and we have the opportunity to perhaps have a bit more room to increase the CapEx of the company. Thank you.
Okay.
Sorry, Sakakemang. You are right. We are negotiating now with the regulator. We have an opportunity, a project, to inject CO2 in Indonesia. We are negotiating the conditions of this injection. In this case, of course, we will be able to launch the project. Thank you.
Thank you, James. Next question comes from Jason Kenney at Santander.
Good afternoon. Couple of questions on hydrogen again, just going back to an earlier comment. How do you think it's best to model that renewable hydrogen volume or equivalent this decade? Do we simply back out a feedstock cost or an energy input to future refining, or are you assuming it as a commodity or a power revenue in its own right in this decade? Separately on the theme of hydrogen, I was wondering if Repsol had any oil assets that could be tested or converted to in situ clean hydrogen production, which leaves CO2 in the ground and obviously just produces clean hydrogen. I'm looking at your international positions as they mature, but maybe even the smaller, older Spanish assets, too.
In the case of the hydrogen, first of all, the most competitive from our point of view of the hydrogen application is going to be the substitution of a part of the hydrogen we are using today in our refineries, coming from the reforming of natural gas. We are going to need, let me say, that prices, they have to be there to substitute this hydrogen in a competitive way. There are mainly two drivers that are going to help this hydrogen to be transformed. The first one is going to be what is reflected in the European RED II directive that considers this hydrogen that is going to be part of the molecules of our hydrocarbons as a biofuel. That is changing dramatically in a positive way, the figures in competitive terms of this hydrogen.
The second one is going to be the potential energy transition framework that the Spanish Authority could launch in terms of reducing the burdens coming from distribution, transport, and so on, that could impact in a negative way the cost of the electricity that has to be used to produce hydrogen. All in all, we expect to be able, in coming years, over this period of 2021, 2025, to have 400 MW, that is what is in our targets by 2025, of hydrogen that could be competitive and could help us to reduce in a dramatic way the CO2 exposure of our industrial sites. On top of that, I think that we are going to see new applications for this hydrogen that are going to come for sectors where electricity is not the solution for this decarbonization.
In sectors like the steelmaking sector, paper mills, cement, or some forms of mobility. That is going to come perhaps a bit later. Today, in our model of five years, what we have is mainly a bet in favor of building this position in Repsol. In the case of the oil assets to test green hydrogen, we have the possibility of injecting CO2 in Brazil, in Sapinhoá. We are analyzing the rest of the assets. In a first view, we could have places in the U.K., perhaps in the future prospect of Alaska. Libya could be, in geological terms, a very suitable asset to inject this CO2. Let me add a bit more, that a part of this CO2 can be transformed in some other ways.
For instance, in the project we have in Bilbao to produce synthetic fuels, that is going to be in operation, the first scalable plant in three, four years. What we are doing is taking this CO2, reducing the CO2 to carbon monoxide, and using this carbon monoxide with hydrogen in a Fischer-Tropsch cycle to produce this synthetic fuel. What we are doing in some way is using the CO2 not to be injected, but after being reduced in chemical terms, using this CO2 to produce a synthetic fuels molecule. The future is going to be different. Different technologies are going to be competing, and what is our bet is to have these industrial sites as new hubs, where the output we are going to have is going to be, of course, energy for mobility and energy for homes. The input is going to be different.
Oil is going to be there, of course, gas is going to be there. We are going to add to these raw materials, to this input, we are going to add green power electricity. We are going to add biogas coming from urban wastes. We are going to add some wastes coming from recycled plastics and so on. All that is going to transform and is changing our current sites. Thank you.
Thank you, Jason. Next question comes from Matt Lofting at JP Morgan.
Hi, Jon. Thanks for taking the question. Just one left, actually. I think during Q1, you net issued further hybrid bonds. Coming back to the previous question, I assume that when you've left net debt guidance for 2021 unchanged, that excludes that net benefit that's come from the hybrids. Linked to that, could you also just remind us how you think about the role of hybrids within Repsol's financing structure internally and how you calibrate it within the context of the broader debt and financing structure of the company? Thanks.
Briefly, yes, you are right. We are excluding any positive effect coming from the issuing of hybrid bonds in this guidance. Today, the debt comparing with the debt we had at the end of 2020 will be EUR 6.8 billion today. It's EUR 6.5 billion due to the effect of the hybrid issuing and repurchase we have in this quarter, EUR 0.3 billion, more or less. What we are giving you as guidance is fully excluding any effect coming from this hybrid potential issuing process. Let me only add, the hybrids are an integral part of our capital structure. We consider these hybrids as a baseline to preserve the flexibility of the company to be prudent in financial terms. The plan we have is, in any case, to maintain the equity content of the existing hybrids.
We are not going to take any of this figure to say that at the end of the year, we are going to be below EUR 6.8 billion. We are giving you this guidance, excluding any effect coming from the hybrid issuing.
Thank you, Matt. Next question comes from Joshua Stone at Barclays.
Thank you, Ramón, and good afternoon. Just a question on this waste-to-chemical plant in Tarragona with the partnership with Enerkem and Agbar. Can you just talk about what still needs to be achieved to take an FID on this project and the likely returns you're targeting? Separately, when you think about this 20% recycling targets of your polyolefin production, could this technology be rolled out across the rest of the portfolio, or would you consider different technologies to get there? Thank you.
Thank you, Joshua. First of all, that's the transformation process of, I think I remember that are 400,000 tons of mainly waste coming from the urban Tarragona area. They are going to produce, I have in mind, the figure of 200,000, 220,000 tons per year of methanol. What is going to be the total CapEx of Repsol, that is going to be at around EUR 130 million-EUR 140 million that in equity terms, because you know that we are in a JV with two other companies, Enerkem and Agbar, is going to be in the EUR 60 million-EUR 70 million, roughly speaking. I could check the figure later if you like, Joshua. What we are seeing in terms of return is around, I have to check the figure, but 16%-17%, more or less. It's a profitable business. It's increasing the competitiveness of our Tarragona site.
That you know that is the most performant and competitive chemical site we have in Repsol. It's fully integrated in our circular economy strategy, using wastes to produce methanol that is going to be used either to produce fuels or to produce materials, chemical products. In some way, thank you for the question, Joshua, because it's a good example of what I was saying some minutes before. We are transforming our industrial sites. We don't have only refineries or chemical plants. In some way, our industrial sites are starting to be also part of the circular economy that is going to drive the future of the industrial activity in Europe in coming years. Thank you, Joshua.
Thank you, Joshua. That was our last question. At this point, I'll bring our first quarter conference to an end. Thank you very much for your attendance and stay safe.
That does conclude our conference for today. Thank you for your participation. You may all disconnect.