Enel SpA

MIL:ENEL

Earnings Call Transcript 2021-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Enel First Quarter 2021 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Monica Girardi, Head of Investor Relations. Please go ahead.

[Monica Girardi, executive]

Good evening, ladies and gentlemen. Welcome to our first quarter 2021 results presentation, which will be hosted by our CFO, Alberto de Paoli. In the presentation, Alberto will provide highlights of the period, and we'll walk you through the operational and financial performance for the group. Following the presentation, we will have the usual Q&A session. We ask those connected to the webcast to send questions only via e-mail at [e-mail].

Before we start, let me remind you that media is listening to both the presentation and the Q&A session. Thank you. And now let me hand over to Alberto.

[Alberto de Paoli, executive]

Thank you, Monica, and good evening, everybody, and let's start with the highlight of the period. And I'm on Page #1. The financial performance of the first quarter came in line with our expectations. Despite the disruption phase globally, we delivered on our operating KPI across all businesses in the context where headwinds associated with COVID-19 have continued to play out and some recovery became visible.

We made significant progresses on group simplification, sitting now at 82.3% in Enel Americas following the completion of the merger as well as of the partial tender offer. This will set the basis for a simpler, leaner and more efficient platform in Lat Am heading their way to a strong value creation.

Now we'll move to an analysis of the period, and I will kick off with the evolution of the EBITDA at Page #2. Our plan anticipated a decline in the first quarter EBITDA of 13% due to the lack of some one-off items booked last year and forecastable business dynamics. In particular, that drop of EUR 650 million was due to the effect of the normalization of nonrecurring items. Worth to remind that last year, we booked more than EUR 350 million of positive impact for the provision reversal in Spain.

FX devaluation was assumed to impact our results in the quarter for more than EUR 70 million. Negative impact associated with lower prices hedged in 2020 as a consequence of last year depressed environment. And lastly, the net effect on the short position normalization and gas wholesale in Iberia. All these items account for EUR 650 million of reduction versus previous quarter already expected in our target and budget. In addition to these anticipated trends in the first quarter of the year, we faced the following headwinds: a currency devaluation beyond our expectation; a gas shortage in lower [indiscernible] in Chile; the effect of the taxes -- the Texas ice storm; and lower-than-anticipated renewable output in Lat Am and the U.S. that are now back to normal already in April.

These headwinds have been counterbalanced by some positive items, in particular: EUR 188 million for CO2 regularization; better volumes and higher price dynamics in Italy and Spain; and the progressive stabilization of the level of electricity distributed in Lat Am, particularly, in Brazil that will last also in the coming months.

Let's now focus on CapEx deployed on Slide #3. We invested EUR 2.1 billion is in the period, an increase of 10% versus previous year. In the ownership business model, almost half of the CapEx was devoted to networks with the remaining half allocated to the generation business, out of which more than EUR 800 million renewables. From a geographical perspective, gross CapEx was deployed mainly in Italy, Lat Am and North America. Around EUR 100 million have been invested through the stewardship business model focused primarily on analysts and renewables capacity managed through our joint ventures. Investments catalyzed from third-party in the stewardship business model amounted to around EUR 450 million.

Moving now on our global generation business on Slide #4. You can see from the chart the total renewable capacity stands now at around 49 gigawatts, approaching 60% of our total installed base, up by 4 percentage points versus previous year. The green repositioning of our generation portfolio is clearly shown by the share of emission-free production now at 66%. Renewable capacity built over the last 12 months is equal to 2.9 gigawatts despite the difficult conditions imposed by COVID-19. Over the next quarters, we will scale up the magnitude of new renewable capacity addition. And we expect to commission in 3 quarters around 5.6 gigawatts of new capacity. As of today, 100% of these projects are in an execution phase, of which 600 megawatts already built and ready to start production, offering high visibility on their deployment by year-end. Such a remarkable acceleration in future group prospects are made possible, thanks to our pipeline.

And I'm now moving to Page #5, where you can see that as of today, pipeline has passed the 220 gigawatts a broadening projects optionality and securing both flexibility of capital allocation and protection of returns. Mature pipeline now worth around 61 gigawatts out of which 26 are earmarked for '21-'23 period and 34 are already covering project for the '24-'25 periods. Over the last 12 months, our mature pipeline grew by 34 gigawatts and 7 gigawatts moved to the execution phase.

The mature and early-stage pipeline dynamics position us optimally for both the planned period as well as for the year to come, offering an advantage into the new decade of 2030 and support our growth ambitions. With respect to the 19.5 gigawatt targeted addition for '21-'23, we stand at around 66% of the target addressed, with over 12.8 gigawatts currently in execution or already built. The residual target is covered almost 4x by the related portion of mature pipeline, which translates to negligible delivery risk and high confidence on achieving even more than this.

And now moving to the operating achievement of global infrastructure and network. I'm now on Page #6. In the first 3 months of 2021, volumes of electricity distributed are up by 2%, showing a progressive recovery from the dynamics observed in 2020 related to lockdown measures. Growing debt on the evolution by geography. In Lat Am, we observed a level of distributed energy almost in line with pre-COVID levels, driven by Brazil. While in Europe, volumes increased 3 terawatt hours compared to the same period of 2020. Worth reminding that while in Europe, the impact of COVID was already visible in the first quarter of 2020.

In Lat Am, the pandemic affected significantly KPIs only in the second quarter. This makes the evolution of volumes year-on-year even more notable and bode well for the future. Digitization of networks remain at the center of our capital deployment with a number of total smart meters installed, they reached 44 million, resulting in approximately 60% of our total end users.

Let's now take a closer look at customers on Slide #7. Our positioning on customers strengthened in the last 12 months, both via our retail traditional operation as well as on services and infrastructure offered by Enel X. 100,000 new customers have been added in the free market mainly in Romania due to the end of regulated tariff and Italy. Energy sold in the free market is up by 4%, with volumes increasing in both B2B and B2C segments recovering progressively the negative impacts associated with lockdown measures.

Looking at Enel X, the division performed extremely well. More than 100,000 charging points have been added, reaching around 195,000, up by 2.3x versus last year. Lighting points reached 2.8 million, up 17% versus last year. 6 gigawatts of demand response capacity was offered globally. And battery storage declined 10 megawatts, as the net effect of new batteries built and some changes in perimeter. In fiber, 11.5 million households have been passed, up 37% versus last year.

And finally, the industrial development goes together with the progress on group simplification on Slide #8. As you well know, the merger between Enel Américas and Enel Green Power Lat Am has been completed on April 1. While a few days later, we announced the final results of the voluntary partial public tender offer for the acquisition of Enel Américas shares that was launched in connection with the merger.

The 2 transactions powered Enel to increase its stake into Enel Américas to 82.3%. Now Enel Américas' new structure is aligned to the one of other subsidiaries with the group and integration of renewables will unlock synergies and will reduce operational and financial risk. The successful completion of these 2 steps allow us now to focus on the next leg of this project. We are looking forward to sit down with remaining shareholders to define a way forward for Enel Américas focusing on implementing the strategic option that will maximize value creation in Lat Am.

Let's now open to the section on financial results. And I'm now on Page #10. EBITDA stood at EUR 4.2 billion in line with expectations for the quarter, as discussed before. Group net ordinary income stood at EUR 1.2 billion; FFO reached EUR 2.5 billion, up 24% versus the first quarter of 2020; and finally, group net debt stood at EUR 45.9 billion, decreasing by 1% versus the end of 2020.

Now we move in the composition of EBITDA on Slide #11. Where it's worth to highlight that renewables and networks account for almost 70% of the overall ordinary EBITDA. In the period, retail and network activities showed a preceding growth driven by the progressive recovery of electricity distributed on our grids and sold to our customers. In terms of geographies, the bulk of our EBITDA comes from Europe, which accounts for more than 75%, while the remaining portion is generated maybe in Lat Am with a 22% share.

Now we will move into a deeper analysis on the results. And so we are now on Slide 12 on global power generation. The EBITDA of global power generation stood at EUR 1.5 billion. Enel Green Power ordinary EBITDA came in at around EUR 1.1 billion. The main operating dynamics are as follows. We have the contribution of new capacity installed in 2020, mainly in U.S., Brazil and Spain, that impacted positively for around EUR 45 million. And we got EUR 30 million positive coming from an increase in volumes of 2.1 terawatt hours, mainly in Italy and Iberia.

On the other side, this positive impact has been offset by the following negative dynamics: Around EUR 50 million from the storm in Texas and the exceptional suspension of gas delivery from Argentina, and new technology in Chile; around EUR 60 million from FX devaluation in Lat Am; and the rest associated with a decrease in energy prices as a consequence of last year, particularly depressed electricity market due to the pandemic. And this is for the Enel Green Power results.

Conventional generation, red part in the chart and trading EBITDA decreased by 36% versus last year. The underlying performance has been affected by the following dynamics: On trading activities, trading activities are back to the pre-COVID performance, and this contributed negatively for around EUR 140 million compared with last year. On the conventional generation, we recorded minus EUR 75 million due to the decrease in hedged power prices made in Italy, Spain and Chile.

Minus EUR 35 million related to lower volumes as a consequence of coal power plant closure, minus EUR 25 million from the currency devaluation in Latin America counterbalanced by efficiencies recorded [indiscernible] and in Chile. Worth to highlight that the period has been affected by the CO2 regularization in Spain, which had a positive impact, while last year performance included around EUR 170 million associated with the provision reversal in Spain. The two effects are counterbalancing, the net effect is almost zero.

Let's now take a look at our infrastructure and network on Slide 13. Ordinary EBITDA stood at EUR 1.7 billion, down 11% versus last year. In the quarter, we recorded EUR 180 million negative impact of nonrecurring items such as the provision reversals in Spain, negative compared versus last year. And EUR 80 million negative impact from currency devaluation. Net of these 2 items, EBITDA would have increased by 2% or EUR 35 million. And this increase is driven by EUR 80 million increase -- positive increase associated with investment deployed for digitization of our grids and to improve the quality. Around EUR 25 million positive of efficiencies. And these positive items were partially offset by EUR 45 million negative impact from regulatory adjustments in CPI on [indiscernible].

As a result, of our ongoing investments, [indiscernible], so the quality of our networks have improved by 6%, to say they decreased 6% that means accordingly has improved for the same amount. From a geographical standpoint, in Lat Am, excluding the FX impact, EBITDA increased by 2% versus the same period of last year, benefiting from the tariff indexation and the increase in volumes in Brazil. While the performance in Europe demonstrates once again the resiliency of our networks supported by solid regulatory frameworks.

And now we move on retail on Page 14. EBITDA came in at EUR 900 million with a progressive recovery from extreme condition experienced in 2020 associated with the COVID-19 pandemic. The group expanded its free market customer base by adding 900,000 new clients over the last 12 months, on the back of the end of regulated tariff in Romania and the increase in the customer base in Italy. Cost reduction efforts continue to progress with OpEx per customer down by 5%. Looking closely at EBITDA. Free market EBITDA is almost flat. Thanks to better performance in Italy, mainly attributable to a 5% increase in volumes, which compensated a 4% decrease in Spain.

In Italy, EBITDA increased 18% year-on-year or around EUR 95 million, driven by a pickup of volumes in both B2C and B2B segment and embedded marginality with unitary margin up by 14% on average. In Iberia, net of nonrecurring items, EBITDA declined by 20%, mainly driven by lower volumes in the B2B segment associated with the economic deceleration for the Industrial segment still affecting payment, by COVID dynamics. This has been partially offset by an increase in the B2C due to higher unitary margin and the reduction in unitary margin from the B2B segments, partially compensated by an higher marginality for the residential gas. And in Romania, finally, retail EBITDA increased by around EUR 20 million due to the end of the regulated tariff as already commented. Regulated market EBITDA is down around EUR 20 million year-on-year on the back of the elimination of the regulatory tariff in Romania and the decrease of the regulated customer base overall.

In the next slide, we will show in detail the earning evolution during the period. And I'm on Page 15, where you can see the ordinary group net income came in at EUR 1.2 billion, down by 5% year-on-year on the already commented dynamics at EBITDA level, which are smooth by better results recorded in all the other lines of the profit and loss. D&A are almost in line versus previous year. As a consequence of lower depreciation, thanks to the impairment made in 2020 on coal assets in Chile and lower bad debt accruals compared to last year which was affected by COVID-19. These 2 items totally offset the impact of the investments deployed. The reduction in financial expenses derives from a few different moving parts: First, lower net financial expenses by around EUR 35 million. Thanks to the efficient debt refinancing carried out during the last 12 months to reduce the cost of debt to lower interest rate instruments and hybrids.

And second, lower other financial expenses by around EUR 150 million, mainly related to the impact of interest accounted for the CO2 regularization in Spain, and the negative effect in evaluation items exposed to exchange rate in 2020. Equity investments contributed EUR 31 million. Taxes decreased by around EUR 145 million, driven mainly by a lower level of earnings before taxes and tax rate at 30% versus 32% last year. And minorities decreased by 25%, reflecting the increase in Enel Americas and in Chile states, and the higher contribution of Italian companies. Worth to remind that in April, we reached 82.3% shareholding in Enel Americas following the completion of the merger and the [indiscernible]. So in the next quarter, you will see a further reduction of minorities to this other increase in our stake.

And now moving to cash flow on Slide 16. FFO stood at EUR 2.5 billion, up by more than EUR 400 million versus last year, supported by an improvement in working capital, which recovered from the COVID-19 impacts. Cash conversion improved to 61% versus 43% last year. As 2020 numbers were affected by the provision reversal in Spain with no cash impact in the pandemic working capital. In more details, the dynamics underlying the FFO evolution can be summarized as follows: Lower EBITDA versus previous year already commented. Lower change in provision, mainly associated with or bad debt approvals. Net working capital at minus EUR 800 million, improving significantly versus last year. Thanks to the COVID effect, which impacted negatively for EUR 400 million in the first quarter 2020. Lower taxes paid mainly due to advanced settlement tax payment in the end -- at the end of last year. Free cash flow stood at EUR 500 million positive with capital expenditure fully covered by the operating cash flow generation.

And now take a look at the net debt on Page 17. Net debt is equal to EUR 45.9 billion at the end of the quarter, Changes are driven by positive free cash flow of EUR 500 million already commented. Dividends paid during the first quarter of the year for EUR 2.1 billion. EUR 100 million associated with our active portfolio management. Hybrid bonds account to this equity and negative impact from FX of about EUR 1 billion. Gross debt stands at EUR 58.3 billion in reduction versus December. Thanks to our effort of cash optimization.

And now before the closing remarks, we take a look on our guidance for 2021. First quarter came-in in line with our expectations. And as commented, on top of what was expected, we recorded some unexpected dynamics, both positive and negative, and offset each other in the period. Some of these dynamics are not entirely first quarter-related, but will extend also to the coming months. On the negative side, if currencies remain weak compared to plan assumption today, mark-to-market suggest a potential impact of EUR 1 billion. This estimate assumes a persisting and pessimistic strong devaluation of effects across the board, while we see potential improvements coming from the rollout of vaccines and exit from the pandemic.

On the positive side, the initial signs of recovery from COVID-19 are expected to last and accelerate along the year, such as the increase in volumes and prices. Further, the group will continue to create value through each strategic sector. Our ownership business model, which will drive our industrial growth and is showing the delivery in line with expectations even in a challenging context. And the stewardship business model also confirmed by the recent announcement of a fiber deal on which we can leverage to face further headwinds, if any. In light of this, we have full visibility on our full year delivery and we can confirm 2021 guidance of both EBITDA and net income level.

And now some closing remarks. As just commented, our full year 2021 guidance is confirmed. We have full visibility on the acceleration of renewables capacity installation with around 5.8 gigawatts new addition expected at year-end and almost 66% of our '21-'23 target already in execution. All this, coupled with an extensive pipeline, which covers around 4x the remaining addition for the period. As scheduled, the Annual General Meeting will be held on May 20. And we will approve the final dividend payment in July based on 2020 results. Worth to remind that for 2021, we have set a fixed remuneration for our shareholders with a DPS of EUR 0.38, implying a 4.5% dividend yield and a double-digit shareholders' return.

Thank you for your attention, and let's now open the Q&A session. And I give the floor to Monica.

[Monica Girardi, executive]

Okay. Thank you, Alberto. We open the Q&A session. I want to thank all of the analysts who sent the Q&A through. In particular, we received a question from Stefano Bezzato, Crédit Suisse; José Ruiz, Barclays;Lillian Starke from Morgan Stanley; Emanuele Oggioni from Banca Akros; Lueder Schumacher from SocGen; Javier Suarez from Mediobanca; Enrico Bartoli from Stifel; Manuel Palomo from Exane; Harry Wyburd from Merrill Lynch; Antonella Bianchessi from Citi; Alberto Gandolfi from Goldman Sachs; and Javier Garrido from JPMorgan.

So I'll start from a few general questions. First one, we saw a few negative one-off in the quarter, balancing out with positives at EBITDA level. How do they impact your net income? How this clean net income would compare to last year?

[Alberto de Paoli, executive]

Okay. So on the net income, the income impact on what we commented on EBITDA. Well, converting to net income impact, we may say that the net difference between the nonrecurring items in 2020 and 2021, is overall negative on net income for the round of EUR 50 million. Then we had other headwinds that are Texas storm and the gas shortage in Chile. That are -- they will total another EUR 50 million of negative impact. So we are around EUR 100 million of negative impact. If we take out these two, net income deal come would have been around 3% increase. And if you see and we take out also the FX impact, net income would have an increase of roughly 7% year-on-year.

[Monica Girardi, executive]

Okay. Second question. Currencies remain far away from your scenario assumptions. Can you share with us what is this packed impact for 2021?

[Alberto de Paoli, executive]

Yes. So we have commented already that today, the mark-to-market of the currencies is approximately EUR 1 billion of impact versus the target we presented to the market in November. But we think that so we are still in a period in which, it's not clear what is the direction of FX together with the exiting of the crisis. So we do expect this potential impact may be lower than this. Having said that, also we are considering this as a worst case, and we are also acting and moving all our action plan to cover possible worst case like this while we are expecting to be so less than this at the end of the year.

[Monica Girardi, executive]

Okay. A few questions on Open Fiber. The first one is, can you detail the underlying components of the capital gain for the deal?

[Alberto de Paoli, executive]

Yes. So I think you follow the news and finally, we will sell the entire stake we own in Open Fiber, 50%. The capital gain expected is around EUR 1.7 billion. And it includes any further payment of capital injection agreed with the other shareholders. The expected net result 2021 in Open Fiber until the closing date, in this calculation, we don't include any potential contribution coming from the earnout that we have agreed in the final agreement on this earning.

[Monica Girardi, executive]

Okay. Alberto, analysts are asking which was the contribution to net income of Open Fiber in '19 and 2020.

[Alberto de Paoli, executive]

In the '19, we had a negative contribution of around EUR 60 million. While in 2020, the contribution was 0 not only because Open Fiber accounted for nonrecurring fiscal benefit, which completely offset the underlying negative results coming from the operation.

[Monica Girardi, executive]

Okay. I think this question refers back to the capital gain. How much that capital gain was included in your business plan assumptions?

[Alberto de Paoli, executive]

Well, when we made the assumption, we had a potential deal of around 40% of the stake and not 50%. So before this, we had forecasted EUR 1.4 billion, that now is EUR 1.7 billion.

[Monica Girardi, executive]

Okay. Next one is when do you expect the deal to be finalized? And if you see any risk that the deal is not finalized by year-end?

[Alberto de Paoli, executive]

Well, so we think that we are going to close during the third quarter. Today, we have just completed the signing phase. Now we are opening the phase for all the authorizations needed for the deal. We don't see any major headwinds within some amount of time, and we foresee the closure in the third quarter.

[Monica Girardi, executive]

Okay. To close on fiber optic topics, can you comment on your potential interest in Ufinet?

[Alberto de Paoli, executive]

Well, Ufinet is a very good company. I think that makes the same business Open Fiber in Latin America, based on Central America and in the countries which we operate with our distribution networks. In 2018, we bought a 21% stake for EUR 150 million of cost. And in the agreement was included a call option that can be exercised by end of December 2021. Now looking at the potential partnership, cost of the coal, potential development that we made to -- in the area, we will take the decision during this time, if exercise the call or not, to going ahead with the development of this business. Also Latin America, after the very good results [indiscernible].

[Monica Girardi, executive]

Okay. We go back to the topic guidance. You have an EBITDA target for 2020 ranging between EUR 19.7 billion and EUR 20.3 billion. Taking out the contribution of Open Fiber in 2021, there is quite some road to cover. Can you walk us the drivers to get to the 2022 guidance?

[Alberto de Paoli, executive]

Well, so the -- we have plenty of moving parts. So this is a very, very strange period in which we have a lot of moving parts. And I can say that on one side, we have, on the ownership model, I think that one of the most promising drive out of the full recovery of COVID and possible extra recovery in the year -- in the first year of completely exiting the pandemic. We have, on the CapEx side, the main way to improve our results. I'm talking about a complete reinvestment of the FX impact on our CapEx. You know that out of compressing a little bit our EBITDA, so the level of investments is also compressed. So we are reinvesting directly to the compression of CapEx. And this year, we are also accounting for roughly EUR 600 million, EUR 700 million of extra investment, not impacting the financial position, those are related to the FX impact on our CapEx assumption.

The second is the next generation EU that now is in the final decision, and then we'll start the action plan. This will drive -- [ if we're getting ] piece of investments not impacting our financial position and also a further increase of returns and extra returns that may be followed by this kind of the investments granted for the grant that will be devoted to the development of this project.

And third, so we have a very, very good and promising financial situation. So we can push strong on using our balance sheet to increase the current investments. In many parts of our business that are -- that needs an improvement that is distribution. We can increase the investments and the rate of development of renewables. We can increase the rate of customer acquisition and that we will do. So we have plenty of things on the generation business that we can push on to fill the gap for 2022. And then so we have just started with our stewardship model, Open Fiber is a good example. But we have plenty of other way to develop any value on this model. And we're working on several parts in the -- in all the business line to implement this model and also value creation. And for sure, portfolio rotation is our guiding star. So we have today -- that there are huge amount of -- huge valuation of several assets. Using a clever asset location may create value and another opportunities for the business.

[Monica Girardi, executive]

Okay. Next is on financial performance in the quarter. So what was the impact of COVID in the quarter? How much you expect COVID to account for in your numbers for the full year. Is there any residual risk that you see on your business?

[Alberto de Paoli, executive]

Well, what -- in the year, now we are experiencing a gradual recovery of post COVID. It was -- this is what we have assumed in our target for the year. So looking at from this side, we haven't got relevant impacts at EBITDA level. KPIs are now going back to a more normalized situation. And so this is the first quarter, but -- so we foresee this for the full year. So we don't expect significant impact. It's clear that impacts coming from the next -- the last year to this year are already in our -- in the expected results. So we were obliged last year to cover a part of our energy with a very, very low prices. And this is something that we still have in 2021 that we will not have in 2022 because the part that we are hedging now is now hedged at prices that are in line with the 2019 prices. So -- but we've got 2 years to pass, so the COVID-19 impacts on our numbers.

[Monica Girardi, executive]

Okay. Can you please update on the regulatory situation in Lat Am, particularly in Brazil?

[Alberto de Paoli, executive]

Well, Brazil is still open. Enel now has opened the third phase of public hearing and to further discuss the economic imbalance. We think that a final decision may come in the second semester. And during this time, a lot of tariff adjustments have been done in Brazil with keeping an eye on not increasing the impact on the customer bill. And -- but so managing in a way in which the distributors are not having any economical effect. But the final decision in the second semester after another public hearing.

[Monica Girardi, executive]

Okay. Enel Americas, when do you expect the kickoff of the second phase of restructuring?

[Alberto de Paoli, executive]

Well, we have just finished the first phase now with 82.3% on the share capital, now we are going to complete the phase with all the contribution of the asset and formality. After this, we think that we may open table with the remaining shareholders to define a common view of the best way to revise the presence in the Latin America business. And I think that this is something that is going to start in the second half of this year. And so you will see some churn at the end of this year.

[Monica Girardi, executive]

Okay. Next, following the approval of the national recovery plans, can you quantify the additional investments compared to your current business plan?

[Alberto de Paoli, executive]

Well, so we have presented a very comprehensive plan on different business of networks. We presented for [indiscernible] digitization, renewable integration on renewables mainly, so all the investment related to hybridization, and to storage and green hydrogen of our renewable fleet on customer side, on Enel X, everything related to public charging infrastructure, buses, [indiscernible].

Well, now we are expecting the final outcome. We think that around the projects, we have presented, we may expect an increase in the range of 10%, 20% of the overall EUR 24 billion of investment in Europe that we have earmarked in our plan for the EU development. This is something that will come different [indiscernible]. And that may add profitability, an extra profitability to our overall European plan.

[Monica Girardi, executive]

Okay. We move back to Italy. Are there any updates on timing around the simplification decree in Italy? Is the approval of this dependent on the reform package of the -- in the new government that the new government wants to implement?

[Alberto de Paoli, executive]

No, the approval on the simplification degree is independent from the package. And the simplification measures will have to be adopted prior decree that need to be approved at end of May. And simplification effort will be centered streamlining the environmental laws and procedures with the aim to cut excessive length of the administrative and bureaucratic procedures to this way to cut times in our case for renewable development.

[Monica Girardi, executive]

Okay. Last one before getting into the business-related question. As the opportunity set for Enel X changed in the context of the U.S. climate plan and EU recovery fund, particularly, considering the focus that these plans have on infrastructure, electricity -- electric vehicle and charging infrastructure?

[Alberto de Paoli, executive]

Well, I would say, definitely yes. So this focus on -- for Enel X, mainly on electrical transportation is the bulk of the Enel X's strategy regarding the U.S. So this will accelerate for sure the oil sector. And for analysts, it is one of the main actors active in the United States.

[Monica Girardi, executive]

Okay. We kick off with the business question related session. We start with global generation. COVID-19 imposed a slippage of 800-megawatt renewable capacity from 2020 to 2021, but were not delivered in first quarter. Can you give us a bit of color on why this slippage happened?

[Alberto de Paoli, executive]

Well, one important point is, yes. So last year, we had this slippage of 800 megawatts in some countries because of COVID impact. I want to stress the fact that we have a very, very rigid way to account the new megawatt. So for some reasons related to the final technical relight, we had ready 800 megawatts already built. But that for me, was not ready for all the checkpoints to be put into the megawatt in the court. They are already in, so I would say that so no delays in the Q1 out of some formality of this 800 megawatts. On the rest of the year, we have now plenty of visibility on the other plants under construction. And we have, today, no delays versus the final target.

[Monica Girardi, executive]

Okay, which I think also answered the next question that was about the target for the full year of 5.8 gigawatts as the Q1 seemed to be lower than expected. Analysts are asking if you can still meet the target? I think you have just answered to that question as well.

[Alberto de Paoli, executive]

Yes.

[Monica Girardi, executive]

Next, is there any region where you have seen a more notable change in competition in the renewable market, either easing or intensifying?

[Alberto de Paoli, executive]

Well, competition, as said, has been always fierce on renewables. So having said that, we do not see any notable changes in the competition level. I want to stress the fact that competition first of all is -- so renewables development is not a one field battle. It's now many fields in which different way which you can develop renewables. If you look at tenders, I would say, tenders are -- so a crowded space with crazy prices offered and a space where it's almost impossible to win a competition. And we are not facing this competition because we are not participating such a space. But all the other fees and renewables have open. Competition is not fierce. It's a good competition also because it's not a competition against the only little developers with only 1 project there. So are -- dead or alive, if you win a tender, postpone your tender. You can win because it's the only way to finance the project. So having said that, now the new big companies are entering the space. We think it is the best way to manage this new space. It's so huge. It's growing so fast that big companies, very rational in their choices, so will change the competition in a way that we pursue.

[Monica Girardi, executive]

Okay. Next is on the performance in North America. Can you walk us through the performance in North America? Economic results seem out of sync with industrial development.

[Alberto de Paoli, executive]

Yes. We have some moving parts. So one is the cold spell in Texas, and we have already commented it. Second is low wind resource at the beginning of the year, so the first quarter was very low in the United States. Now that the things are changing, April and May are -- have been good months, so April and also the beginning of May. Then we had some technical issues, now are solved in our plant in North Dakota that we are now pulling the line. So we think that -- so now there is a gap to be recovered. As we were working recovery there, we had Texas cold spells that had been not expected. The others are normal things that happen in a country and so we have plenty of things that we may activate to cover the gap.

[Monica Girardi, executive]

Okay. Cold spells in Texas, so we stay in the U.S. You have indicated a very limited impact. Can you please explain why you have been less affected than other companies? Is there any further downside risk to this level of impact?

[Alberto de Paoli, executive]

Well, so we had a limited impact because only 1 contract significantly affected position, so -- or the other part of our presence in the area been almost completely hedged. And now we are activating. We activated all our legal rights under this contract to for the conditions. For the time being, we see no further downside in risk.

[Monica Girardi, executive]

Okay. Hydro availability was an issue in Chile, but better elsewhere. Can you provide a summary of resource availability so far and your view on the year?

[Alberto de Paoli, executive]

Well, it proves a very relevant fact going forward. The big global and developing renewables anywhere is reducing the overall risk for several parts of our business. So one is the production. Because it is frequent that you have countries with a high performance and with low performance. That -- so the all-in all effect is a net effect of all these headwinds and only 1 trend, there is a trend of growing production because of increase in installed base that we are doing. And 2021 is exactly the case and because of this, we see that while we had this reduction in Chile, well, we are having very, very good results in Europe. And so we say that, we have also different way -- different prices. This may, at the end, be a positive headwind that we are following to present to have and to cover some adverse effect we are experiencing on the other side.

[Monica Girardi, executive]

So cold spells out. How much coal capacity are you planning to close in 2021?

[Alberto de Paoli, executive]

2.9 gigawatts, 2.6 in Spain and roughly 300 megawatts in Italy. It's clear that we are already ready. So we are waiting for the final authorization of the various TSOs of the countries to have the final grid life to shut down the plant.

[Monica Girardi, executive]

You have shown prices impacting negatively the results of the quarter. Can you please explain what drives this in light of the high level of forward sales you have across your markets?

[Alberto de Paoli, executive]

Well, as I said, the very point that are impacting the results, prices this year is because we have to compare the hedge prices in 2020 and the hedge prices in 2021. So having said that, and having said that we covered our production last year with a very, very depressed scenario, this is the overall pricing bucket we are experiencing this year.

Today, we have roughly, say, EUR 130 million of less of impact coming from less prices. I want to say that it is not something that is expected for 2022, where the production is now we are hedging 2022 production at prices that are in line or even higher than the prices we had in 2019. Because now we are benefiting on a very, very high price because of the CO2 prices and because of the cycle of commodity is coming back to a normal or even higher level prices than the pre-crisis level.

[Monica Girardi, executive]

Okay. The next question on the short position. Can you provide more color on the negative impact associated with the short position in Spain?

[Alberto de Paoli, executive]

Well, it's is not a negative impact. It's negative compared versus last year. So today, this year, short position is almost -- is around 0. It's not impacting the business. But because last year, because of the high volatility of prices, it was very, very positive. So it was what we said. So the comparison between the 2 situations is explaining the negative impact that we're seeing.

[Monica Girardi, executive]

Okay. We move to networks. Following the interest of WPD network in the U.K., are you looking for any other assets? Have you already identified a target in the U.S.? Or would you consider to add assets in Lat Am? What would you -- what would drive your preferences in terms of which grid asset to buy?

[Alberto de Paoli, executive]

Well, first of all, one important specification. The WPD interest by us was related with our stewardship business model. I remember that applied to the grids network is the way in which we foresee to buy a minority stake in the business, gathering funds for the majority stake. And through this position to offer to the Greece and the other shareholder, our services in terms of managing the network, using our platform and bringing the network to our International level for purchasing the assets. And through this way, creating value, operating value along the time in which we are -- we stay in the network and creating value of selling the stake together with the other funds when we exit. This is WPD. And this is not -- so our ownership business model, which we are seeking for buying a network unit and managing 100% in our ownership business model.

Having said that, it is important because WPD is only that way. We are keen to do both the side of this business in other countries in which we think that we may create value, managing the networks to also our capabilities. United States will remain a key target of our further expansion in grids for both the business model because we think that we have -- there is huge opportunities in the U.S. to make business because of the energy transition is going to happen, because digitization is going to happen, because there is a big need of modernization of infrastructure. So this would be something that, for us, is better. But you will see us looking at some part of the world approaching the country with a different business model, depending on the countries and depending on our aim to create an integrated business, only create value, managing the part of our distribution assets.

In Latin America, on the ownership business model, we think that we are now in a good position. So we do prefer only to do some asset rotation only to manage a little bit our asset base. But you will see us maybe focus on other parts of the world for the development of grids.

[Monica Girardi, executive]

Okay. We go to retail. Can you compare the retail markets in Spain and in Italy in terms of competition by customer segment today?

[Alberto de Paoli, executive]

Well, competition is fierce everywhere. So if you compare, now in Spain, you have roughly, say, 300 power suppliers. In Italy, we have roughly 600. So this is the number of competitors in 2 countries. So competition is there. Market share different as in Spain, we have roughly 50% market share. And in Italy, we have roughly 44% market share. And today, so we see -- this competition, we think that Spain is a little bit higher because I think it's now driven by the position of other big companies that are trying to take some stake. But -- so in -- the share rate is, by far, higher in Spain than Italy.

This does not mean that an high share rate translates in a reduction in customer base. It may then only translate at a higher level of acquisitions. So with an increase in investments you have to do to keep your customer base stable and this is what is happening in Spain. In Italy, it's a little bit lower, mainly because we are still on the big tranche of regulated tariff, so we have a big number of customers. And so this is reducing a little bit of the competition today is only focusing on the free market. It is not so big in Spain.

[Monica Girardi, executive]

Okay. Another one on retail. Can you provide more color on margins for B2B and B2C for both Italy and Spain?

[Alberto de Paoli, executive]

So dividing in segments, this I think is the best way to look at it. So the residential segment looked very strong in Italy mainly, but also in Spain. This is because an increase in the unitary margin. This is mainly Italy, Spain is almost flat. And also with an increase in the average consumption. So residential segment, very good in both markets. On the B2B segment, Italy, very good expansion of unitary margin and so stable volumes. Iberia, reduction in unitary margin and also a reduction in volumes delivered there. Here, as I said, we think that the exiting from the pandemic is slower in Spain than in Italy. So we do expect following the vaccines to have a road to recover of the B2B in Spain that will be skewed towards the next quarters.

[Monica Girardi, executive]

Okay. Before moving into the last question of Q&A, I have a flow of question coming from different analysts and investors around the guidance just to -- it seems that someone is not squaring the numbers. So the first one is a clarification around the guidance of our full year on EBITDA. [ Emanuele ] is asking if we confirm the guidance, even if the currencies are staying at the current mark-to-market?

[Alberto de Paoli, executive]

Yes. I said, we confirm the target set because, as said, we are working on this worst-case scenario. So we classify this as a worst-case scenario, but we are working on it. So it's clear that everything we may do on the stewardship business model, this is plenty of things that we can do. But on the other side, I said, also on the ownership side, because of the signs of volumes and prices and what I said, remember that -- so if we have volumes increased in Italy and Spain, these are not hedged. So you have a double increase coming from the increase in volumes and the fact that these volumes are facing spot prices that are in the range of 45 and 60 in Italy and Spain. So this is a big increase.

We're working also on some parts of the world in adjusting some tariff indexation we're seeing. So there are discussion open in Argentina because we know that Argentina freezed tariff in the last 2 years with a CPI of around 40%. So it's clear that now the table is open and maybe closed within this year with some benefits and other moving parts that we are working on. And so that's why we confirm the target at the EBITDA and also at the income level.

[Monica Girardi, executive]

Okay. Staying on net income, a few analysts and one investor is asking about the capital -- how the capital gain of Open Fiber contributes to the target because it seems it's too big to squeeze into the target? So they're basically asking about the translation from EBITDA down to the bottom line. And if any measures -- sorry, and I add another part. If any measure might be taken in order to compensate for this big capital gain and bring the positive forward to other years?

[Alberto de Paoli, executive]

Well as I said, it's clear that this capital gain so -- allows us to reach the target and as I said, it will help us also in doing some actions that may increase the level of results after 2021. Now we are looking at several things we may do. One of this is that we may address a plan to fully refinance part of the debt that is already out of our sustainable finance effort on one side and there is bringing the cast that is really linked to a level of interest rates was the level that we experienced say 7, 8 years ago. These are level that is going to expire in the next 3, 4 years. We may use a part of this to sort of accelerate in financing in time which we are still experiencing already low interest rate that seems to be the final time of this benefit. So this is suggesting us to rush to close this position for, so we can use some part of this capital gain to finance this expansion. And this is one of the lot of actions are setting to work around the results and to benefit also in the next years of this capital gain.

[Monica Girardi, executive]

Okay. We'll move back to the P&L questions. So P&L items came out on levels that seem to point to an improvement of the values embedded in 2021-2023 plan. What should we expect for the full year on G&A, taxes and minorities? Financial expenses recorded a significant reduction. What is the plan over the next quarters? And what's the level of financial costs that you are expecting for 2021?

[Alberto de Paoli, executive]

Well, as I said, so we don't see any major change related to the numbers that we have earmarked for the items below EBITDA. We think that we will have the D&A that would stay at around EUR 6.7 billion at the end of the year. Taxes, EUR 2.7 billion, and minorities EUR 1.3 billion. When it comes to financial expenses, remember that...

[Monica Girardi, executive]

Alberto, sorry, you put your hand on the mic, and we couldn't hear you for a couple of seconds.

[Alberto de Paoli, executive]

Okay. So I was saying that reduction in financial expenses is not entirely related to the refinancing activity. As said in the presentation, we had a one-off of roughly EUR 120 million, EUR 150 million related to the fact that the CO2 dispute that we won and a positive impact on EBITDA on one side, but another impact on financial costs because we got the interest there on what we paid some years ago. And so we filed up the interest that we accounted in the financial expenses. Out of this, we have normal trends that are already earmarked in the target that we have for 2021.

[Monica Girardi, executive]

Okay. Remaining on the net debt and financial expenses territory, net debt remains pretty stable. What should we assume for 2021, looking to have a net debt on EBITDA of 2.7x?

[Alberto de Paoli, executive]

Yes. We'll stay on this level. The impact on the first quarter is related to some time effect on some part of the cash flow that will be fully recovered in the next quarters, and we'll bring the final result at the level as we have foreseen our target, and that will represent the 2.7x net debt-to-EBITDA for our KPI.

[Monica Girardi, executive]

Okay. Last one before moving into the questions that we received last minute from analysts to our email address. Could you please specify the amount of issued hybrids at the end of March 2021? What is the amount of these hybrids and which one you are including your net debt calculation?

[Alberto de Paoli, executive]

We have a total hybrids in March of around EUR 6.8 billion. Out of this amount, EUR 2.2 billion are included in the net debt. While the remaining EUR 4.6 billion are accounted as equity.

[Monica Girardi, executive]

Okay. I think we can now move to the question that we received from the web. So the question #14. Are you interested into ERG's hydro CCGT assets in Italy?

[Alberto de Paoli, executive]

Well, so we -- well, I would say that everything that is moving in Italy, we are interested in looking at it. So yes, we will look at it. So it's a plan that we know very well because it was part of our asset base. It is a very good asset. We think that hydro production may be useful in a situation in which shutting down coal will bring our position long to customers and covering a long position to customer with renewable capacity is in every countries in which we are something that is relevant for us. If you combine this with the fact that Italy is a little bit lagging behind in the development of renewables because of bureaucratic impact now are going to be soaked by so this simplification decree. But so it will take some time to have a level of development, like Spain. So these steps may be useful. It's clear that, that has to be useful are at the right price. So we are not ready to buy at any kind of price to look at assets.

[Monica Girardi, executive]

Okay. Sorry, just one going back to the capital gain of Open Fiber. An analyst is asking if the EUR 1.7 billion capital gain can be considered ordinary?

[Alberto de Paoli, executive]

Well, yes. Because this is part of what we said is our stewardship business model assumption that we said in our plan presentation in November, that the first way to look our stewardship business model, we will count an accumulated EBITDA produced in the next 10 years of EUR 17 billion. And in this EUR 17 billion, we have different components that are one, so the products we send directly to our platform, the products and services that we sell to our platform with 2 joint ventures and the third is the capital gain that we made to -- in buying and selling stakes from the joint venture that we have created.

In this case, Open Fiber is the first. Other will come because we have -- we talk about the Ufinet before. Ufinet is another way to create value to this kind of business in different parts of the world. So then this will be applied to other business lines in different ways to create value, but within the stewardship business model had.

[Monica Girardi, executive]

Okay. I go back to the question from the web. Question #10. On the short position in Spain and generation and trading margins, is there any actions that Enel is taking in order to regain 11 more close to the first quarter 2020 in the near future? Conversely, is the first quarter 2021 EBITDA to be considered as a reference for the future?

[Alberto de Paoli, executive]

No. I say so the short position is not related to actions that we may do. Is -- it's a situation of the market that may suggest that is better to buy energy instead of producing it. It's rather complex, but easy to explain. So it's clear that the way in which the short position acts is a short or a sharp reduction in prices that suggest that it's better to buy instead of producing energy. It's clear that the way in which you are exposed to this is the level of hedging that you do. But because we don't want to have any higher level of risk deposition in a normal year like this year is neutral. It's almost ranging to 0. And so that is open to be positive if you see a sharp decline in pricing like it happened in 2020 because of -- in this case, because of the pandemic. Other years, we got for different reasons.

[Monica Girardi, executive]

Okay. Question #13, Enel keeps reducing its average cost of debt. Can the company continue to do so if bond yields keep rising?

[Alberto de Paoli, executive]

Well, I said this, so, we have to wait to reduce our debt. The first is -- so now the residual bond to be refinanced are bringing a cost, an overall cost of, say, 5%. So it's clear that we are not at that level. So also, if we wait, we will get a steep reduction in this cost. On the other side, I remember that the sustainable linked bond that we issued the first time 2 years ago now are becoming mainstream. And through this way, all the issuers are getting a discount versus the normal bond that is around -- in the range of 20, 25 basis points like we did. So these are the 2 steps. The third is, as I said, because we are having some space in our net income headroom because of the capital gain, we will move in -- so fastening the refinancing of the receivable debt. We will try to have a big tranche liability management this year to cover in advance potential, so increase in interest rates that are going to happen.

[Monica Girardi, executive]

Okay. Question #9. What is your expectation for Brazilian distribution rates in 2021? In particular, do you expect the regulatory intervention during this year?

[Alberto de Paoli, executive]

Well no. With regulatory intervention, there is -- an overall regulatory intervention, no -- there are no intervention. We do expect an intervention, as I said, for the economical recovery of COVID. It was due last year. Now we are in the third phase of options to understand what is the overall impact and the amount. There are a lot of tables open. But in several countries and several distributors in Brazil, I would say that some tables have been closed with positive outcomes, not so relevant. So we are not talking about big amount, but EUR 10 million, EUR 15 million every table. But the attitude overall is to close positively these tables also because -- so you are not going to be for -- not still answering on the peak a request for the economical restoration. But so you are inclined to have so positive steps on the single request and table opened.

[Monica Girardi, executive]

Okay. Question #11. The improvement in supply is dynamically driven by both margin and volumes is expected to continue over the coming quarters?

[Alberto de Paoli, executive]

Well, yes. So we expect the trend to continue. We are doing extremely well in Italy, in acquisition and also on the margins and energy sold. We are just starting to have combined selling with Enel X and a lot of products that are going well. So I think that Italy this year is set to going on in this positive trend for this year.

[Monica Girardi, executive]

Okay. We go back to Open Fiber capital again, Alberto, sorry for that. So there are a number of questions around how the capital gain translates into net income, in particular, what's the tax regime that is also taken with the gain? And if this capital gain -- how this capital gain is included into our guidance? So how much of the EBITDA translates effectively into our guidance?

[Alberto de Paoli, executive]

Well, capital gain, the effect on net income is almost entire level of capital gain. And so taxation is very limited on this kind of capital gain because they benefit what is the participation exemptions in Italy. That's why I said, this will create and constitute a big base to start some program like the liability management center because it's clear it's entirely or almost entirely flowing to the net income results.

[Monica Girardi, executive]

Okay. So just to be clear, there will be some compensation down to the P&L?

[Alberto de Paoli, executive]

Yes.

[Monica Girardi, executive]

Okay. Question #8. First quarter other financial charges. If ForEx stays where it is now, is the drop in other financial costs reported in first quarter sustainable throughout the year? Or could it be reversed later in the year?

[Alberto de Paoli, executive]

Well, as commented, so I said, this is CO2 regularization in Spain is the main impact. And so if we freeze the ForEx scenario at the level it is today, we think that we can maintain this positive gap year-on-year. It's clear that on the other side, as I said, so we will run some liability management opportunities that may affect the result of the years, but so -- it's going to be -- the next year is going to be benefiting from this activity.

[Monica Girardi, executive]

Okay. Question #7. Customers in Italy at the end of first quarter were 9.6 million. Your planned target is to reach 18.5 million customers by 2023. Is it still a realistic assumption? How lower customer base would impact the EBITDA?

[Alberto de Paoli, executive]

Well, the 18.6 -- 18.5 million customers is a level reachable at the time in which the end of regulated tariffs will come. Now -- so it's going to be delayed. It has been delayed another year, 1.5 years. And is compatible with the fact that Enel will maintain the market share that today has on the free markets. Remember that today, so today regulated market, it is not a market, so the regulated tariff because remember that the market is still open 100%. But in the market is present regulated tariff and the customers are free to stay in the regulatory tariff or to exit.

So the expiration of this regulated tariff under which the business is -- as a business that is only based on cost compensation because energy is provided by the single buyer. And so companies are only compensated by the commercial -- the operating cost on customers is something that is going to be reduced every year. And every delays in the spot market is going to be reduced because customers are exiting the tariffs and are entering the free market. Not only because of the commercial effort of all the actors in the market, but also because now that the energy is becoming more central in the energy transition. So having a full range of services instead of only one is changing the attitude of customers to have different actors that will offer them a full range of services.

And having said that, it's clear that the realistic assumption is really on the time at the end of the regulated tariff. Every delay is not impacting us a lot. Because at the end, so we have time to move customers out of the regulated tariff. We and the others. So the market will be leading than today. And on the other side, because at the end, having this market is not giving us any major results. I think that at the end of 2023, so everything will be done. But if further delays will be adopted, this will not impact a lot on our numbers, will only impact on the number of customers we count on free market, but not on margins and the financials of the business.

[Monica Girardi, executive]

Okay. Question #4. Your renewable pipeline is way larger than the capacity you aim to build over the next 10 years. Which success rate are you expecting from the pipeline? If successful, would you consider selling some of the projects?

[Alberto de Paoli, executive]

Well, we have to develop 100 gigawatts of capacity in the next 10 years with the ramp-up just now over the first 3 years will stay around 7. And so having said, we're now at the very beginning of this ramp, and having an average of 10. We have the last years of the planning, which we have to deliver 13, 15 gigawatts every year. To develop a pipeline of -- develop a program of 100 gigawatts, you have to have 300 gigawatts of early stage -- of late-stage pipeline. So it's not since the beginning, but more or less, to have will be plenty of possibility of choosing the best project, we have to work in this manner. So having 220 gigawatts a day is not in our [indiscernible]. We have to increase hugely our pipeline. It will see us through this, and you have already seen it, because we have increased 30%, 40% of the pipeline in the last 6 months. But you will see a steep increase in the next month because we have to reach very soon a level that we comfortably cover really better when we are foreseeing for the next 10 years.

Having said that, 3x is a high level of coverage. And -- because it's the only way to have some tender won, but because of our development is not only to tenders. It's clear that we may have some excess of projects in some countries in which have already reached the level we were seeking for. And in this case, so you will see us be keen to sell the projects. And we may do it in selling the project and stop or creating, as I said, in our stewardship business model, some joint ventures with funds that may have a lower cost of equity of ours, so they may, in this case, buy project that we are not developing because our quest in the return of investments are higher than the joint venture we can establish with them. But that's why so we are pushing also the stewardship business model because it's maybe the way to otherwise on one side, our pipeline and on the other side, also to sell the stake to actors that may have lower requirements so valorize better the stakes we have.

[Monica Girardi, executive]

Okay. I have to go back to the guidance, Alberto, beg your pardon, but there is still a question around the difference between what we were assuming in the plan regarding the capital gain and what we are guiding now. So an investor is asking if in the -- in last year guidance, we were assuming the contribution of Open Fiber. And if not given that now we have this contribution, we decided to reinvest it in other activities. And given that now the contribution is even bigger than what we were originally estimating, we can use it to offset some FX issue.

[Alberto de Paoli, executive]

We were assuming already in our target the capital gain of Open Fiber, not of the level of today because I said that we were assuming 40% stake to be sold, not 50%. And as I said, we already put in our target some activities to bring forward a part of this effect, like I said, the liability management or other way to act and to move the value next year. Like so renegotiation of some gas contracts that are not producing cash or other way to better -- to have better results in our operating business after. It's clear that now that we have an increase in the capital gain, as I said, we are facing, on the other side, some headwinds on the FX. So it may be useful that this increase may sort of cover some increase -- so some negative headwinds coming from the FX if FX will stay the level of today or will follow the mark-to-market we have today. This is on the economical side.

On the financial side, it's clearly different because we have EUR 2.6 billion of cash in because the overall transaction is EUR 2.6 billion. And so on the financial side, clearly, we are going to invest this cash in to fuel our organic growth and also to make other things on -- so other part of the stewardship business model. As I said, we have a call option on the other piece of the fiber business in Latin America. That is Ufinet, is not sure. So because we are assessing if the call option may drive increasing value like the Open Fiber in the next year. And so we can decide to use a part of this money to put it in other business to create the same -- we hope the same sort of similar value in other venture that we may do in Latin America.

[Monica Girardi, executive]

Okay. I lost a little bit the chain of question. I think we have a couple left. One is the question #2. Could you please explain how the effects can have a negative impact both on EBITDA and net debt?

[Alberto de Paoli, executive]

No, net debt is not negative. So the debt is positive. So it's reducing debt. Okay. So because -- so the -- today -- so on the net debt, the point is, I want to be clear on the net debt because I've already explained this before, but it's better to reinforce the fact. On the debt, so we have no impact, really no impact on debt. Because our debt is fully covered, is fully hedged. So there -- what we report on debt is related on the level of exchange mainly related on the dollar. But so this is ranging around the strike price that we have covered through hedges. So having said that, today, at the level that we are experiencing the numbers that we are giving you in the first quarter, we are at the level of the hedge. So the level of debt that we have today is for some reasons, quite in line what is the level of the debt we have -- we will repay at the end of the time. So that's -- the ranging is only related on the level of dollars, but it's not impacting the level of the strike price where we have hedged almost all the exposure that we have in dollars.

[Monica Girardi, executive]

Okay. Now question #3. Sorry, can you tell us what returns are you seeing from res investments, which are currently under construction, more or less than your targeted 12% EBITDA on CapEx?

[Alberto de Paoli, executive]

Well, on the overall, we don't see any major change because as I said, so we have many parts, different parts, which we are working on. And clearly -- so the overall impact stay around the level that we had in the plan. It's clear that in some part, we are looking at different way to develop renewables. We are looking also at some hedging related to the portfolios that we have in specific areas that may give us the possibility to have an increase in returns, not increasing in a significant way the level of risk that we are taking in developing revenues.

[Monica Girardi, executive]

Okay. I think we are approaching the last one and it's about the exposure, the question #6. The exposure of the group to the significant rise in CO2 power and gas prices. Can you remind us the rule of thumb exposure to prices? And when would you expect any earnings benefit to start to show?

[Alberto de Paoli, executive]

Well, we are -- it's clear that -- so the way in which CO2 prices is peaking an increasing in the spot prices in the market. It's clear that having less and less exposure to thermal production but having the markets, already fixing the price based on thermal production, is clear that the benefit in pricing until a new market design will come. That is exactly the way we are acting. So looking at markets that are setting, they are still setting prices with thermal production and supporting renewables with a realized cost of energy, this is by far lower than this price set by the thermal generation with so high CO2 level price. It's an exceptional period in which you may do a high level of extra profit reducing your tiebacks of your plant. And if you can do it, backing the production to your customer base, is the best way to get value and this is exactly what we are pursuing in several countries in which this situation is possible.

[Monica Girardi, executive]

Okay. I think this is the last question. I think we have answered to all of them. If something was not answered, it's completely my fault as we received many questions and some I have slipped out of my inbox. We will provide an answer off-line immediately after the closure of this call.

Thank you, Alberto, for being with us, and thanks to all of the analysts and the investors that have been so, so participative to this call.

[Alberto de Paoli, executive]

Thank you.

[Monica Girardi, executive]

Thank you.

[Operator]

That concludes the conference for today. Thank you for participating. You may all disconnect.