Enel Spa Unsp/Adr

Thank you, Monica. Good evening, everybody. So let's look at the highlights of the period. So we are in chat number two. Over the second quarter of the year, we have touched the peak of the crisis associated with COVID-19 across all the countries we operated. You will see in the next slide how these contexts have evolved over the quarter and the extreme scenario that has been realized. Despite this distressed environment, the group recorded a solid performance. Net ordinary income is up 6% year-on-year, demonstrating the resiliency of our business model, even against sudden and deep disruptions. Our strategy was not put on hold. Actually, dynamics of the business that we consider as being long-term trend has accelerated. We made significant progress on decarbonization. We commissioned 800 megawatts of renewable capacity, paving the way for a new record delivery for air installations in 2020. We shut down 2.1 gigawatts of coal and announced the accelerated closure of our coal plants in Chile, this is the last one, and one unit in Italy at the Brindisi Power Plant. The simplification of the group fraction progressed as planned. At the beginning of July, we have reached a 65% shareholding in energy. We are well on track on the second share swap in Air America, on which you will receive an update in the forthcoming weeks. In 2020, ordinary earnings will continue to underpin a mid-to-high single-digit growth versus last year. I want to highlight that this business model of ours is solid and sustainable. It is set to capture unprecedented opportunities that will come from energy transition worldwide and will translate into support for growth in future years. In light of the solidity of our company, we are in a state our minimum dividend per share. So this year, the minimum DPS is set at 0.35 euro per share, which underpins a 7% growth compared to the dividend paid last year. So let's analyze now the evolution of the scenario in the second quarter. That said, and we are now on chat number three, the market and micro-trends we observed during the first quarter deteriorated further in the second quarter, closely mirroring the dynamics of COVID-19. Foreign exchange represented the main headwind, which Latin American currencies have devalued significantly since the beginning of the year, on average 18% just in the second quarter alone. Brazil is one of the countries that has weakened the most. At this point of the year, we don't expect any recovery in the effects rates, and we use current levels to protect the financial appearance. So the financial we will hear about are based on the present effects rates and explicitly demand went further down in second quarter, with Italy and Spain making double-digit decreases, widening further the contraction of demand over the third and the previous quarter. Spot prices have shown a sharp contraction in second quarter, with Spain and Italy the most affected. We expect this trend to normalize in the coming months, allowing economies bouncing back from lockdowns and adjusting to a new normal. In July, we already see an improvement in demand in the European countries, as well as in Brazil and Peru and Latin America. Thanks to the integrated margin management, we have already locked in volumes in full for 2020, and so for the 2021 production of 70% in Italy and 90% in Spain, securing far higher prices than current levels are expressing. Foreign exchange was the only headwind we could not control. and more importantly, how this translated into an income impact. This extraordinary environment has put in motion several initiatives to accelerate economic recovery, both at national and supranational level. The European Green Deal has defined climate plans that stimulate a long-term data perspective. A 1.13-year long-term budget reinforced by the 750 billion euro sources allocated through the next generation of new funding will address problems with economic and social damage brought by COVID-19 in Europe in the wake of a sustainable recovery in the eurozone. Resources available could support the sector in achieving both short- and long-term goals thanks to the stimulus and new investment-raising power infrastructures bringing Renovation Automotive and Astra Industries has picked up in the process of fighting climate change and reaching net zero emission by 2050. The next generation EU could be further a boost to support the green energy recovery, adding more firepower and green investment. Furthermore, at council level, England, Spain, and Brazil have already implemented different measures to affect financial distress derailing from the pandemia. In particular, in Latin America, we expect to be constructive on the discussions regarding the measures to be taken to affect the impact on distribution companies coming from a sudden drop in volumes. If we move now to slide number five, which covers investments, you see that CapEx in the first half was equal to 4.1 billion. This was in line, this is in line with last year, despite the measure's articulation. The net of currency devaluation and inflation, capitals would have increased by 5% year-on-year in real terms, signaling the commitment and the capability of the company to deploy investment for the real industrial targets. Around 90% of total investment was devoted to renewables and infrastructure and networks. in the effort, in the accelerated effort to digitalize CREEP and the capitalization of our generation CREEP. From a geographical perspective, gross capex was deployed mainly in Latin America, Italy, and North America. Development capex stood at $2.5 billion, representing about 60% of total investments, out of which around 75% was allocated to renewables, mainly North America and Latin America. Looking at the 2020-22 period, more than 80% of asset development capex is already addressed, providing high visibility on industrial targets for the period of the plan. If we focus on the decarbonization strategy, we can move to chart number six, which covers global power generation. Out of the installed capacity of 83,000 megawatts, Renewables account for 46,400 megawatts, corresponding to more than 55% of the total. This time, we see the surpassing of thermal capacity, which is down by 6,600 megawatts versus previous year. And unsurprisingly, production from renewable sources, which at the end of 2019 overtook production from thermal generation for the first time in energy history, is up 4 terawatt-hours year-on-year. almost twice as much as the production from thermal generation. As a consequence of this significant shifting balance towards renewables, emissions-free production is close to 70% of total production up by 11 percentage points versus previous year. So we can say that we have reached, two years in advance, the target of emissions-free production quota we have set in our 2020-2022 business plan. Looking more closely to the progress on the plan for renewables, you see that with around, this is now chart number eight, with around 10 gigawatts of capacity built and addressed, we have secured 70% of the 14.1 gigawatts that we plan to add in the period 2022. It is worth to highlight that one year ago, we were at around 73% of the targeted addition for the 1921 business plan, which I remind you, entails the deployment of 11.6 gigawatts, almost 3 gigawatts less than current target. So what needs to happen is that we cover the remaining 4.2 gigawatts, and these are covered more than three times by the portion of the mature pipeline with completion, operation date by 2022. The mature pipeline is up by 4,000 megawatts versus Q1, and now stands at 44,000 megawatts. This provides ample comfort on the delivery of the residual target and offers significant leeway to increase the level of commission. In light of the progress achieved on the delivery, as well as the size of our pipeline, we are in position to confirm our 14,100 megawatts commitment, and actually we are certainly that the renewable capacity that we will deploy by 2022 will exceed significantly this level. Actually, you can see from the slide that the gross pipeline is in excess of 100,000 megawatts. We have been working extensively on growing this pipeline to support future deployment targets. A larger diversified pipeline ensures a profitable growth, minimizing operating risks. So if you go now to the thermal generation, you see in chat number nine that we are accelerating further our coal phase-out. In the first half of 2020, we have shut down 2,100 megawatts of capacity, bringing the group's total coal capacity below 10,000 megawatts for the first time ever. Production from coal stands at 6.1 terawatt-hours in 2020, down by a remarkable 72%. from 22.1 terawatt hours, which we produced in the first half of 2019. So it's six now, it was 22 in 2019, first half. In terms of turnover, revenues from coal amount now to 2.6% of the total, which is half of what we had in June 2019. Over the past weeks, we have taken further steps ahead in our decoil process. Enel Generacion Chile, obtained the authorization to terminate the operation at Bocca Mina by December 2020. This is three years earlier than the original schedule, as well as obtained the early closure of Bocca Mina 2 in May 2022 versus the original deadline of 2040, so 18 years earlier. In Italy, the Ministry of Economic Development has given the green light for the early closure of Unit 2 of the Brindisi power plant, which was expected to happen in January 2021. This progress solidifies our commitment to the decarburization of our fleet by accelerating closure of around 1,000 of capacity ahead of plan, and leading to a total coal capacity installed in 2022 that will be more than half than the level that we had in 2019. Time to move to networks, so chart number 10. volumes distributed at down 8% overall and across all countries of operation, with a degree strictly correlated with the timing and magnitude of the COVID-19 outbreak. This operating parameter does not, I repeat, does not translate into an economic effect in Europe, as revenue cap regulatory frameworks typically of European countries are not sensitive to volume distributed, but it does affect Latin American countries. In Brazil, our biggest operation in Latin America, we reckon that the regulator acted promptly to ensure that the financial sustainability of the sector, and we are currently engaged in discussion on how the economic effects also can be absorbed. Throughout the period, despite operating difficulties, our efforts for the digitalization of the grid remained unchanged. bringing the number of second-generation smart meters installed to 14.9 million, up year-on-year by an outstanding 48%. Out of the 74 million end users we have in our network perimeter, 60% are now fully digitized. As a result of investment in quality, the SAIDI and SAISI indexes have decreased by 10% and 7%, respectively. A decrease of these indexes means an increase in quality of service. Let's now take a closer look at customers. This is chart number 11. Customers' positioning continues to strengthen via a retail traditional operation as well as on new services and infrastructures. Progress on customers will allow us to tap the value pool associated with the uptake in unitary consumption, which yields expected to accelerate further in Europe on the back of the green recovery and electrification of the economy designed for the continent. Customers in the free market, now at 17.3 million, are up by 600,000, with an increase in the customers based in free markets concentrated in Italy. Energy sold in the free market is down by 9% due to the COVID-19 and lockdown measures in countries where we operate. Alberto will give you details later on the economic performance of the retail business. Looking at Enelix, the division performed extremely well despite COVID-19 and recorded significant progress in the deployment of charging infrastructure, which is up 41% year-on-year, with almost 90,000 charging points installed, extended its leadership on demand response with $6.20 of capacity offered globally, Battery stores increased by 36% during the year, reaching a capacity of around 110 megawatts. Fiber deployment reached 8.7 million households, passed up 45% year-on-year. I now hand over to Alberto for the analysis of the results.

So, Alberto, up to you. Thank you, Francesco. Good afternoon to you all. So, now I am on page 13. And now let's move on the financial summary for the first part. As said, the DGA stood at 8.8 billion euros in line versus previous year. Group net ordinary income grew by 6% year-on-year, came in at 2.4 billion. This financial performance was achieved despite a strong devaluation of currencies and the impact of the pandemic of both volumes and bad debt that I will detail later. SFO reached €2.1 billion, down 58% versus last year. This decrease is mainly attributable to movements in working capital due to COVID-19 crisis and some differences in timing versus previous years. Group net debt increased to €50.4 billion. I will be back on this in a few slides. Before moving to the detailed analysis of the semester, let's take a look at what effects of COVID-19 means in the semester for our financial results right now on slide 14. As you can see, the group EBITDA was mainly affected by two negative impacts. 370 million euros were from the devaluation of currencies. and 300 million units associated with the sharp contraction of volumes, impacting retail activities worldwide and networks in Latin. As you probably know, there is a discussion ongoing with regulators to find the way to assess the mechanism to this situation. The net of both COVID-19 and effects, as we've done, would have been up by around 8% year-on-year. Looking down the profit and loss, we recorded a negative impact on DNA worth 130 million euros driven by bad deprivation accelerating in the second quarter at 13. On the group's ordinary net income, the COVID-19 crisis translated into around a burden of 200 million euros topped up by a negative effects impact of around 800 million euros bringing the overall impact in the range of 300 million units. Notwithstanding these major headwinds, our integrated and sustainable business model out of the decision financial performance. And I'm now on slide 15. As the way we commented, we reported the ordinary data at 8.8, probably faster. showing a solid improvement of the underlying operating performance despite the adverse scenario. Resiliency of our European networks has been supported by solid regulatory frameworks, while in LATAM, volume dynamics have impacted the operating performance as well, as we will see later in the presentation. We require a coordinated and decisive action to be taken by the Latin regulators in order to tackle the current emergency. On regeneration and retail business, the integrated margin management has protected the economic results against market repercussions. In the next slide, I will focus on the main global business line drivers. Now I am on page 16, so before talking about the single business line, let me comment around our progress in efficiencies. As you can see from the chart, in the first semester, credit expenses decreased by 7%, or more than 300 million euros, mainly thanks to the efficiencies registered in the period. recorded efficiencies for more than 170 million, well-balanced between the detailed conventional generation and networks, thanks to an acceleration of the efficiency plan. And we are now well on track to reach our target of 1.2 billion euros accumulated in 2020-2022 plan. Finally, we recall that as already commented during the first quarter result call, the current level of OPEX, which amounts to 3.6 billion euros, has been positively impacted also by the provisions released in pay for 356 million euros. So now we will go through the details of the operating performance for the semester. We are now on page 17. where we take a look at the performance of the global power generation business line, while in the following two slides, we will go more in detail to the performance of energy power and the conventional generation. The ordinary EBITDA of the global power generation increased by 9% and reached 3.4 billion euros Excluding the impact of FX devaluation in the TAM, performance was up by 15% versus the previous year. The improved profitability of a global power generation with a higher share of renewables is highlighted by the 10% increase in unitary margins. that last year, performance included around 100 million capital gains associated with the full consolidation of our North American assets, as well as 160 million positive contributions associated with the termination of a PPA contract in Chile. As we delighted during the first quarter call this year, in this year, we had the results has been positively impacted by a provision reversed on its pain of around 170 million euros. Last year, 270 million euros of one-off this year, 170, 100 less. In the next two slides, dedicated to energy and power and conventional generation, I will analyze the main components of the performance, and now we can move on page 18. For renewables, Ordinary EBITDA came in at 2.3 billion euros, 1% increase versus last year. Net of negative effects impact, EBITDA would have increased by 7%. As mentioned in the previous slide, in the first half 2019, we recorded a net capital gain and an end determination of the PPA contract in Chile for a total amount of 180 million euros. No impact, one-off impact has been registered this year. So the operating performance was mainly impacted by the following dynamics. 100 million euros coming from the additional capacity installed in 2019, 150 million euros of increase from the positive contribution of hydro plants performance, mainly in Italy and Colombia. Seventy million of increase as a result of higher prices, fully hedged, driven mainly by Italy and Latin America, and 20 million coming from efficiencies. The overall impact of the effects evaluation of LATAM currencies is in the range of 130 million euros. Now we can move to the conventional generation, and I am on page 19, where you can see that ordinary EBITDA increased by 32% and came in at 1.1 billion euros. As already said, the semester was positively impacted by the provision results on the same that accounts 170 million euros for this specific business, for the conventional generation business. While last year, the ordinary EBITDA included the positive contribution associated with the early termination of a PPA contract for around 80 million euros. Made of these items, the underlying operating performance has recorded an improvement of 23% year-on-year, or around 170 million euros. And this is mainly due to 130 million as a positive result coming from the group's short position, plus 60 million resulting from higher prices for the edge, mainly in Italy, around 55 million euros coming from efficiencies, mainly in Italy and Spain, The effect depreciation impacted by around 60 million euros of decrease in depreciation. Moving now on page 20, you can have a look on the infrastructure and . Here, ordinary data came in at 3.8 billion euros, almost flat year-on-year. Net of the 170 million euros that impact on currency evaluation, EBITDA would have increased by 3%. Reversal provision in Spain impacted zero in EBITDA for around 180 million euros, while last year the EBITDA was positively impacted by the regulatory settlement in Argentina for around 200 million euros. Also here, the net effect of the one-off 2019 and 2020 is almost the same. As a result, the underlying operating performance has been broadly stable, demonstrating the resiliency of the business, particularly in the European countries. In Latin America, the business performance was impacted negatively for around €80 million, mainly in Brazil, by the 7% drop in volumes of electricity distributed. As said before, Discussions with regulators are ongoing, and we expect, further to what has already been done to offset the financial impact, other action to be taken to offset the economic impact. In addition to the volume impact, the main moving parts of the period have been the following. We added 100 million euros related to the investment in digitalization and improved service quality. We added 40 million euros for efficiencies. We've got the indexation in Latin America for 80 million euros that has partially compensated the decrease in volume. And then the current evaluation impacted negatively for around 230 million euros. And lastly, on page 21, I'm on the retail side. As you can see, EBITDA evolution reflects a really challenging environment, which has seen a drastic shift in annual customer base consumption. The descending base at the end of a period that we consider the worst of the year, being affected by severe lockdowns, in particular, Retail operations continued to work properly, and in one day, the customer base remained stable. In Italy, we added 500,000 new customers in the centralized market. Additionally, around $17 million cost reduction has been due both in free and regulated markets, out of which $14 million in Italy. Looking closely at the free and regulated markets, The free market in BIDA declined by around 70 million euros or 5% year-on-year. The decline is mainly attributable to the following offense. In Italy, BIDA declined 7% or around 70 million euros due to a temporary longer position driven by a sharp contraction in volumes led by B2B customers. And also lower gas consumption mainly as a consequence of a mild weather. The average unitary margin for both B2B and B2C markets were broadly unchanged versus last year. In Spain, a decline by 6% or around 20 million euros on the same temporary long-duration dynamics observed for Italy, driven by a decline in the electricity sold. Regulated EBITDA increased by more than 20 million euros on better energy margins. Regulated market EBITDA decreased overall by 1.5% or 10 million euros. And now that we have gone to business drivers, we can move to the financial section. I'm on page 22, where you can see that ordinary group net income came in at 2.4 billion euros, or plus 6% versus last year, mainly thanks to lower financial expenses, a better result from equity investment, and the reduction in minority interest, which more than expected increased in DNA and higher tax rate. DNA increased by around 130 million euro mainly refers to the higher level of adverse accruals related to COVID-19 scenario, for which discussions with regulators and managerial actions are ongoing to compensate the impact. The decrease in financial expenses reflects the continuous decrease of the cost of tests which declined by around 30 basis points versus the end of 2019, with now an average cost of debt at 3.8%. Results from equity investments stood at 35 million euros, while taxes increased by around 165 million euros versus last year, mainly due to $35 million for higher earning before taxes and others for recognition in 2019 of deferral tax in the U.S. and in Argentina and also on the cost in 2019, we booked some positive one-off items such as the fiscal incentives on intellectual property in Italy. Minorities decreased by 18%, reflecting operating dynamics mainly in Spain and Latin America, and an increase in Latin America and Chile state, followed by our share swap activity. Now moving to page 23, we can have a look on the cash flow. As said before, FFO stands at 2.1 billion euros, strongly impacted by the COVID scenario, which reached its peak during the second quarter of the year. In more details, dynamics underlying the FFO compared to the previous year can be explained as follows. EBITDA came in line with 2019, considering also that the provision reversal in Spain has no cash impact. Change in provision increased by around 400 million euros, mainly attributable to increasing the debt for COVID dynamics already commented and the resolution number 50 in Italy. Working capital was impacted for around 2 billion euros by the lockdown in different countries as already anticipated during the first quarter result presentation. Payment of taxes increased last year had been moved to July, so this is a difference in fact, this is only a time difference. Out of the 2 billion euro tax extraordinary impact, we expect to recover around 1.2 billion in the second half of the year, on top of the usual working capital recovery as a consequence of the return to a stabilised situation worldwide and to the reabsorption of the capex curve. leading to a €2.5 billion better for recovery from working capital management in the second half. Worth to mention that ANEL in Brazil has already approved the measure that will support the reabsorption of around €500 million by the year end. Negative leakage flow is a consequence of the dynamic mentioned above. which we expect to partially recover in the second half of the year, bringing our cash generation to cover investments. And now let's move to take a look at net debt on slide 24. Net debt to the 50.4 billion euros. Changes are driven maybe by an increase of 200 million euros related to new leasing on IFRS 16. The negative FHUO impact of 2.1 billion already commented and dividend already paid for 2.6 billion euros. And cash outflows related to the further increase in the share of Central America and the Chile through the equity swap. And then we recorded 700 million positive FHUO impact from the valuation of local currencies against the euro. It's worth to highlight that net debt at price-to-price for that gender is 500 million lower. We have already around 4.5 billion euros of hybrid still full-accounted debt. And in Brazil, we will shortly receive 350 million euros from the financial relief program for the distribution companies. Our growth debt increased by around 2 billion euros as a result of devolution of the test, which has increased by around 5.2, and the reduction of cash deriving from the liability management activities performed at the end of 2019 to finance 2020, which helped us also in reducing cost of debt by 30 basis points compared to the end of 2019. In the following slide, you will appreciate our strong liquidity position and credit metrics. As you can see, our total liquidity as of the end of June stood at 26.5 billion euros, which 5.9 in cash on end and the remaining 20.6 in available committed credit line. This level of liquidity covers 1.5 times the debt measuring by 2023 amounting to 18 billion euros net of short-term debt that is routinely rolled over. Our credit metrics show a stable level of leverage, notwithstanding the extremely adverse impact on cash dynamics arising from COVID-19, with an EBITDA ratio of 2.8 in the last 12 months. The solidity of our credit metrics is further testified by current rating levels and outlooks expressed by rating agencies, which acknowledge the sustainability of our credit metrics, even in the latter distress scenarios. And now let me conclude this part of the presentation driving you through our new financial target for the year that you can see shown in the slide. Over the course of the presentation, we have commented in detail the many factors that have come into play in the past month. All these variables contributed to the creation of the extraordinary circumstances we are operating in and that will remain with us for the foreseeable future. Looking ahead, we are extremely confident on the long-term performance of the group, and the solidity of our business model provides itself once again, showing resiliency against turbulences and in extreme scenarios. There is an ongoing extensive effort to offset the impact of these crises through discussion with local authorities and regulators, as well as through managerial actions. Not all factors can be assessed, with effects being an exogenous variable and debt dynamics associated with broader economic conditions and regulatory intervention. We do not expect a recovery of currencies by year-end, and we must reflect this new scenario into our 2020 guidance. Based on the updated currency projections, we decide to expect it to come in at around 18 billion euros while net income is expected to be in the range of 5-5.2 billion euros for 2020. Medec, starting from 50 billion, yet just commenced, is projected to fall in the 48-49 range, depending mainly to the completion of active portfolio management opportunities that we are exploring. Shareholder remuneration, backed by the 0.35% Europe's share minimum guaranteed dividend set for 2020 will accuse a mid-high single-digit year-on-year growth comprised in the range between 7% and 9%. I finish here. Francesco, I am over to you for closing remarks.

Thank you, Alberto. So, as you have all heard, we've been experiencing an extreme, quite unforeseeable scenario with headwinds. ranging from all sides, from macro variables to operating dynamics. So I should say that if there was to be a proof of the resilience and validity of our integrated business model, this is the proof. Despite this very challenging environment, we have been able to deliver a solid operating performance on the back of this very resilient business model that we were talking about, coupled with our efforts to ensure business continuity across all segments and countries, leveraging heavily on the digitalization of our asset-based processes. Our long-term strategy is confirmed and is accelerating, driven by the structural changes in the market, further enhanced by the economic stimulus under definition. The increased support on a green recovery will drive investment upwards and will open up new value pools that we are more than ready to capture. Earnings are set to grow mid-high single-digit underpinning an increase in the shareholder remuneration of at least 7%, which is further supported by the minimum guaranteed dividend per share policy. It is worth to highlight that our dividend policy has not changed, and we will continue to pay the highest dividend per share between the 70% payout mechanism and the minimum guaranteed, which has remained unchanged for all the years of the plan. So thanks for your attention, and let's now open to the Q&A session, Monica.

Okay, great. I hope the line is getting better from now on, as we have some... some weird noise on the line. So we're now ready for our Q&A session. We will kick off as usual with questions we received so far from Emanuele Joni, Banca Acros, Harry Weiber, the Bank of America, Mary Lynch, Jose Luis Barclays, Rosalind Steele-Berenberg, Miki Becker-Bernstein, Antonella Bianchetti-Pitti, Andrew Moyer of Credit Spice, So the first question is for you, Francesco, and it's on the full year guidance. that have been revised that take into account effects in practice. Do you see any further risk to that?

Of course, at the very moment, we should say no. It is heavily depending on the COVID-19 evolution across geographies in the next months. if things remain in the direction which we are seeing both in Europe and the evolution in the U.S. and Latin America, the answer is this is it. Should there be further convulsions of this epidemic or pandemic, then this has to be assessed probably during the fall. As we spend, I think, the FX effect, which is fully accounted in our projection at the year-end, is the problem without which we would not be having any change in our policy.

Okay, second question. Starting from this new level of 2020, what can we expect for 2021 and 2022 for both EBITDA and net income?

So, as you know, we are working now on the new plan, and you know that this is the plan that we present in November. Keep in mind that this November will also be the one. This plan will take into account the view that we have of the evolution of COVID-19 through the end of the year and, of course, the spinover in 2021, and also the actions that we have to put in place to offset any longer-term trends that we can probably extrapolate at the end of the year. It will also take into account the positives that will start to fit in due to the actions, in particular in Europe, that will be put on the market by the EU Recovery Fund. So this is something that we are studying and we're factoring in the 21-22. you will be able to appreciate this fully in November. I cannot anticipate much. You should also know that because this is 2020, we have a 2020-2030 10 years positioning for the company that we have developed, and it will be also important to give some perspective on the longer term than the typical three-year cycle that we used to give all the people. So, I know this is a kind of long-winded answer to say nothing, but basically we don't expect much more than what we've seen in 2020 at this point in the negatives.

Okay, we move to the CFO net debt guidance, which changed as well. What are the main moving parts on giveaways of net debt?

What I said, so we expect to close in the 48-49 range. It's clear that we have some moving parts already. And the main is the damming processes and suspension of the countries in which we are. So the very point depends on the deal suspension or if there would be a prolongation of the damming processes. If everything will go the way we foresee, we will also recover this 1.2 billion euros of working capital, leaving 800 million euros of working capital to be recovered the next year. The second point is it's clear that we have increased our debt in the first part also because we saw a window of opportunity in the dieback Latin America shares in Chile and in the United States, and we did it. So the overall plan foresees some coverage through this portal that we have in the second half. It clearly depends on the fact that there will be the possibility to close some deals in the second half. If not in this time period, we will have some delays in covering these imports, and we will do the first port in 2021. It depends on how the economic scenario will recover and also the deal-making will start.

Okay, there are a couple of questions that I will split in two on the dynamics related with the working capital. The first one says, can you provide more color on the extraordinary components of the working capital, I assume, in the total?

Well, as said, the working capital has been mainly affected by missing collections. So what we did is on one side we worked to try to reduce the impact of the missing collection because of the impossibility to get cash directly. Remember that it depends mainly on how the single country is accustomed to pay. So we have countries with 80% of... bank payments that suffered very little. Other countries that are based on big percentage of physical payments that suffered the most. As said, so now the situation is heating up. In other countries, in July, June, July, it's been very bad in terms of cashing. So this is the way in which we have We see our forecast, so in this way we will recover the amount like said.

Another one on working capital, which is about the future. What is the level of recurring working capital that we should expect in a normalized year? What are the main drivers?

Well, in a normal idea, as I always said, we work with zero impact on working capital. So this year, as said, we think that we will end in having an impact of roughly 800 million euros, not zero. And these 800 million euros will be fully recovered in 2021.

Okay. Now, we go back to this semester, Alberto, and it's again for you. Can you provide a breakdown of COVID-19 impacts on each business segment in the first semester?

Well, first of all, I think it's relevant to say that we are working around an impact of 300 million euros out of the VEX impact. The VEX impact is 100% of the Latin American business. And so we work with roughly 200 million euros of European impact. If you split for the first, the impact in Europe and impact in Latin America, I would say that 70-80% of the impact comes from Latin America. So Europe has an overall impact of near zero. This because the different business performed in different ways. but giving the sense that the integrated position is offering a relief in terms of risk of business. Going to the different business line, I would say that the distribution business is impacted by around 100 million euros, 100% Latin America. Retail business is impacted around 200 million euros, almost 100% in Europe. And I remember that this impact is for the over-contraction that retail is having in this year because they covered the power consumption and now to resell the part that is exceeding the selling part at the price, at the spot price that are 50% lower than the acquisition price. Generation is up, mainly up in Europe. So all in all, the impact on generation of COVID is almost zero with Europe, up for trading and short position and latam down mainly for volumes and this is more or less the overall impact then we have this 130 million euros but the impact is equally split between europe and latin america to 50 50 roughly 70 million europe and 70 million in latin america

Okay. Theo, we go back to you with OpenFIDA. What is the latest on the Macquarie bid for Anna's stake in OpenFIDA? Is the €7 billion figure for the whole entity correct?

We did receive an unsolicited non-binding offer from Macquarie, and that was discussed in the Board of Directors on June 10th. After that, we did issue a statement, which is everything we can say at this point. So we are sorry, but we cannot give much more info, give many more information than what I just said.

Okay, another one still linked with OpenFly. Isn't EL interested in selling and what could be possible uses for the proceeds?

Look, we are not particularly interested in selling at this stage. We have commitment to pursue the industrial mission of open fiber, which is progressing extremely well. And it's thanks to the open fiber efforts that Italy has regained position in the disgraced, laggard situation in which it was when open fiber started its activities. So we think we are committed to continue the activities of OpenTribe, which, by the way, creates a significant value. And I think the value has been particularly underscored by the COVID crisis. So we're not particularly keen on selling said which, that is valid not only for OpenTribe, but for basically anything we have. You know, depends very much on what kind of offers that are put on the table, and also, in fact, that sooner or later, our mission industrially in Open Fabric will be considered complete, and at that point, in any case, it will be the right time to monetize. So it's early to say about that. It's early to say that we have decided to sell. We have not requested offers. We received and solicited offers, as I said before. So we're looking at all kinds of value creation alternatives The use of proceeds is not particularly earmarked because, as I said, we don't have a decision to sell at this stage.

Okay. Another one on non-organic activities. Any update on M&A outlook strategy now that we are well into 2020? There has been some activity on renewables. Would you consider acquisition in the renewable space? I would add another question that just came through the web, which is if you might consider a higher share of disposals in renewable for coming years.

Okay. So, on M&A, our view is the following. We don't think that the COVID crisis will pass unnoticed, so there will be some casualties during this fall and this end of the year. Small players and developers of mid to small size will be caught out of breath and probably will have to sell either projects or sell themselves outright. So we might be interested in some of these opportunities selectively and depending on geography and opportunity mix. And as you know, we remain interested in grid acquisitions as we consider networks to be a very important part of our industry story. We are skeptical about large and in particular at this point in time and given the situation. So on the selling side, Let's put it this way. We have, as you might have seen in the presentation, an incredibly large pipeline of development, and we have been successful in creating value-selling projects after we have developed and built them. So this might be opportunistically or strategically an avenue of value creation going forward, given the appetite for renewable portfolios that we observe on the market and given the depth of our pipeline. So this is something we are assessing and will be clearly addressed during the November presentation.

Okay. Now, there is a question on offshore. With considerable opportunities opening up in offshore wind is the recurring one. The U.S. is that one. Do you see yourself opening up your horizons to include offshore? If so, how would you go about that in terms of gaining or acquiring the technical expertise?

Frankly speaking, I don't think you should invest into something just to learn about that something. This is a very strange way of doing things. But because we have 100,000-plus megawatts pipeline, that does not include offshore, we really don't need it. And the reasons why we remain skeptical about the offshore is because, mainly, we don't need the pain, the lengthy processes, the incredible density of capex, and the risks associated with it. So we respect those companies that focus on that only, We don't understand those that do everything, including offshore, because we think it really belongs to a different world. We don't think we should get involved, at least, until it remains so expensive, so risky, and so lengthy in terms of construction time.

Okay. Again, Francesco, for you. You are now at 65% in Enel Chile and have an outstanding share swap on Enel Americas. There are two questions here. Are you expecting to get 65% in America soon? And the second question is what would be the end game once you get to that threshold?

We are progressing well on the swap. Of course, we will be able to give you the news as soon as this is completed, which is not going to happen in a long time. So pretty soon there will be an announcement of when we are getting to a position that we consider proper in that. So it's not a long time, but you have to wait for that. In Chile, we think we have a limit of shareholder ownership, which is in line with our policy for countries that have a liquid and working and functioning stock exchange like Chile. So we think that is the right position to have for Chile. For Latin America, we think we should go beyond that threshold, but we can only do that once we get to 65%, and that we will discuss with the other shareholders once we have to reach that point in order for them and us to do the best to maximize the value of the asset.

Okay. We move now to Alberto. There is a set of questions which are specifically focusing on . So the first one, is on the regulatory measure called Quenta Covid. And the question is, how much you are expecting to get out of the regulatory measure? And when this fund will be available to the company?

Okay, so we will get up around 500 million euros by the Quenta Covid. 70% will be available to the company end of July in these days and the difference will be paid after December 2020 progressively along the second half.

Okay, the second one is what is on top of that still under discussion?

In fact, this move is the financial situation of distributors in Brazil. Now what it needed is to reach an economic equilibrium for concession, and so something that will recover the impact of demand losses and bad debts. And we can foresee an extraordinary target review and a public hearing process that will start mid-August.

Okay. Now there is still, again, another question on Brazil. Can you break down the potential impact of lower demand volumes, debt impact from bad debts and working capital, over-contracting of power volumes?

Okay, on lower demand, the impact foreseen in the forecast for lower demand is about 130 million euros. And the full or partial recovery of this part is what I said is part of the ongoing discussion with the regulator. On the bad debt and working capital, But that, in fact, is seen as around 30 million euros. And as I said, the increase is driven by the freeze imposed on the activities. And it depends on what the time will be until when the dining activities will be banned. And on the other side, so we have a worsening performance in the credit collection, but so everything related to the financial impact has been reverted by the Quenta COVID. So also this one item that is covered by the Quenta COVID. And also the over-contracting. So the over-contracting in Brazil now is in the range of six terawatt-hours, but it carries no economic impact because 58% of this over-contracting is covered by the current regulatory framework that covers the distributors up to 105% of over-contracting. And the remaining part has been covered by the Quanta Covid.

Okay. Again, to Alberto, another question on Brazil. Can you give us an update on the main operating parameters of your Brazilian grids?

Well, so I recap. Volumes are seen 7% decrease year-on-year. Metro clock is up around 1%. And because of the suspension of inspection and aimed at detecting codes and emitted streaming, And quality, we are having, and we will have a significant improvement. We are, so we see a standard point improvement in our quality indicators.

Okay. Francesco, we go back to you. Completely different subject. Analysts are asking if there is any risk on dividend payments.

Yeah, let me, before I answer the question, I have another thing to add to the previous one, which is the one on the 65% ownership of Latin America. We should know and appreciate that having 65% or lower percentage of Latin America has shielded us somehow from what has happened in Latin America during the COVID-19. So when we will assess what to do next, we will also take that into account. because this has been quite an interesting point of view, which we have appreciated of having not 100% of consolidating the results, but in America not 100%. That said, on dividends, no, we don't have a policy change, so we will maintain the 70% payout ratio on earnings. We don't have any visibility of negatives that make us change that policy at all. And don't forget, we also have the EU guaranteed, which will restate that covers the plan period, so it will extend until 2022 and change.

Okay. There is still, for you, Francesco, there is lots of interest around potential acceleration in investments, particularly in Europe. Questions around that and specifically on the EU recovery fund? and what else do you think is needed in order for now to increase the share of renewable investments towards Europe and in Italy in particular?

I think I should add that if you look at where the funds are mostly going, they're going to Italy, Spain, Romania. Those three countries are the ones where we are present, and therefore we have a big opportunity in that sense. We think that the investments will be along development of renewables, investments in networks that are fundamentally need to be reinforced in order to adjust to a growing number of renewables, storage, which again needs to be there in order to adjust to the networks for renewables. Networks, renewable storage triangle is the core of the investments that we have already targeted. Now there is an incredible opportunity to accelerate, coupled with digital. So, again, networks and cyber optics are also closely connected. Then we think there will be an additional boost from private funding, not necessarily European funding, provided that sustainable finance feels clear into the direction in which Europe is going. So it's a very interesting and very important positive evolution. On the negative side, obviously, the question is, will the bureaucracies of the single member states be able to process the amount of work needed to use this fund in the time period that is allocated by the Commission? So that's something where we We have to work hard and support all governments, if you will, Spain, Italy, Greece, Romania, every government in which we are present and we want to grow, to really manage this properly.

Okay, there was actually a specific question on bureaucracy in Italy, but I think that you have just answered to that as well. So the next one is on something that we mentioned on the press release, In the past few days, you mentioned a big transformation within generation activities. Can you explain what it means?

Well, it means that what we have been doing so far is now becoming extremely evident and is precipitated, if you want, in a spectacular way by the COVID-19 crunch on demand. So the thermal squeeze is squeezing out faster than ever. what was already going to be squeezed out, so mostly coal and somehow gas. So what this means is that there will be the need to transition a lot of people into a new workforce that will no more deal with coal plants but with other kinds of investments. And in that transition, we will need to address the need to perhaps have some of our colleagues upskill, reskill, and so others probably gradually being able to leave the working condition and going to retirement. So we are talking about setting up schemes within the just transition mechanisms that will allow more senior colleagues, we're talking about 1,000, 1,300 people, to go into voluntary early retirement covered by special mechanisms that we are setting up for this very particular situation. And this, of course, will have different timeframes because, you know, certain countries do it earlier. But this is going to be repeated across several countries more or less in the next few years.

Okay, great. We have now a set of questions on our global business lines. So I'll try to go through them quickly. So the first one I think is for you, Francesco. With the 800 megawatts shift to early 2021, how the shape of delivery of the 14.1 gigawatts for 2022 will change? Any impact on profitability?

On the commitment, I think we have already commented during the presentation. We are totally sure that we will reach or probably exceed this 14,100 megawatts of 2020-2022 target. additional installed capacity at the end of 2022. So we don't have an issue there. Some megawatts that were planned to come online on 2020, end of 2020, will probably move to 2021 because of COVID-19 related delays, but they will not impact the 2021 installed capacity. So 2021 will be an exceptional year in which we will keep working at the 2021 let's say, originally scheduled plants, and probably they will also get the 800 that moved from 20 to 21. So we don't see a material impact at all on the 2022 target. Like we said before, we're confident we'll probably go to exceed that once we look at the new strategy courses that we are going to present at the end of the year.

Okay, now I'll stay with you, Francesco, for a really tough question. The Green Deal has kick-started also the hydrogen technology. Are you interested in investing into this type of generation source, and what could be energy business model on hydrogen, and what level of returns do you see?

Look, in 2002, so about 18 years ago, Mr. Rifkin wrote a book called The Hydrogen Economy. Now, it's 18 years later, and that book was fantastic, but nothing of the book happened, notwithstanding the fascinating logic behind it, okay? Why that? It's a long story, but why this time is different, that's a question. There are two things that happened. One is In 2002, renewables did not exist the way they exist today. They didn't exist at all, and those that existed were a joke. Today, renewables are cheap, fast-growing, and they are displacing the rest of energy generation worldwide, bringing the cost of electricity to levels that were unthinkable at that time. That's number one change. The number two change is that it is now, because of technological evolution, it is now possible to conceive a reduction in the cost of electrolyzers, so the plants that break up water to generate hydrogen and oxygen, that will make the green hydrogen production competitive, coupled with adequate level of competitive renewable energy. So these two things were not there at that time when Mr. Riskin wrote his book, but they are there today. So we think it's perhaps there was time for hydrogen to be green, not blue or other colors, which are a joke. But the green hydrogen, I think, has a real chance. We are going to, of course, work hard at making this economically convenient and competitive with normal hydrogen, which is very cost-effective but extremely polluting in terms of CO2. And we are going to invest in trying to make this technology work in the next years. There is not a timeframe in which you can say in the next three years this will happen. It could probably happen in a timeframe between five to ten years. We think this is something that we strongly believe can happen, as we did strongly believe on competitive renewables when people didn't have a clue about it. We're not interested in blue hydrogen or other stuff because we don't think CCS is a working economic technology. We've gone through that already. But we're focusing on green, and I think it can be probably the success that we all need. In terms of returns, of course, it's industrial applications that can have returns that are, you know, compatible with this kind of indexes. So we're not talking about spectacular returns, but returns that are in the IWGF.

Okay, next question is on portfolio rotation on renewables for 2020. Alberto, do you want to answer to that?

I think Alberto, you're on mute. Alberto, you're on mute.

Yes, yes. So I was saying only minor operations are under study for 2020.

Okay. Hydro-verability, how 2020 has been so far, and what is the expectation for the full year?

We had an hydro-production up 4% versus last year, and this has been driven particularly by the strong performance recorded on retro-wires during the first quarter of the year. Expectation is aligned to the trend experienced in the first half, with a general scarcity of resources all throughout the year. The technical availability of other plants is aligned with the best historical performance.

Okay. Now, Francesco, we go back to you. on a question about repowering potential for hydro and hydro plants in Italy, I guess, and concession update again in Italy.

Concessions, okay, our concessions, they weren't expiring at the end of the cycle, so we have a 2021, 2029, sorry, 2009 date for the concession of our hydro plant, large hydro plants. However, other players have concessions that have already expired and are renewed on a yearly basis, so this is a real problem for some of them. We think that there is a potential for investment for repowering and enlarging hydro potential in the council. That potential is hampered to the lack of visibility on the concession date. Maybe that is not so much valid for us because we do have at least another nine years Don't forget investment in hydros typically go a longer time. Today we have a plan that covers about 150 million euros for the 2022 of repowering activities that will take place regardless of concession expiration because, as I said, we go to 29, so it's long enough. It could be much more provided we have visibility over a longer time period, and this is more so for all the other hydro players in the country which have shorter time to decide. So I think this is likely to be a case in which the Italian government might look into this in long concessions in order to give stability of time frame, time horizon for additional investments to be unlocked now in the light of the present need of investment phase. So I think it's positive and I think it might happen.

Okay, good. Last time you asked, Francesco, again for you, do you see a deceleration in ongoing negotiations for PPAs or options in these areas?

I think I should separate two things. There is not a lack of deceleration in the demand. So we see a lot of tenders still floating around. There have been in the last two months some let's say, physical, the federation and the interspacing during the negotiations of PPAs because of lockdown constraints, but minor and totally manageable. So overall, the answer is no. We don't see a change because of COVID-19 at this point. We see robust demand for PPAs on renewable energy bases across the Americas, north, center, south, of course, with different timeframes, depending on the country. But overall, no flexion there.

Okay. On conventional generation, we move to conventional generation. Alberto, analysts are asking what has been the short position in the first half, how it has evolved compared to the first quarter, and what are your expectations for the second half? Alberto, you're on mute.

In the short position, we got in the first half 2020 around 120 million euros. This is because the sharp drop in prices opened this market opportunity. In the second half, it will depend on the of repeated prices, what we see is that we might expect the benefits potentially will stay. So, no major changes along the second half.

Okay. Sorry. Go ahead.

Sorry. Go ahead.

So, there's like a kind of a complementing question on balancing services. The question is, can you quantify the impact of the balancing service during the semester?

Okay, so this is a different situation. It may be as a consequence of the increasing due to the low demand scenario . Because of this, in the first alpha, in Italy, because in Spain it is a pass-through, so you're going to count anything from the 35th hour, so it was up 60 million euros versus last year. Also for this, we don't see this going to change the situation. is going to be normalized and also the need of electricity is going to go down in the second half.

Okay. There's a question on cold phase out, Francesco. Updated expectation for 2020 in light of the acceleration we have seen in the first half?

In 2020, we already gave the figures significantly. So we are looking now at what happens after that. So I think people in Chile have accelerated, so we will go at the end of the planned cycle, so it's 22. If you remember the planned cycle by 22, we should have had 6.6 gigawatts. We will be substantially below that in terms of megawatts installed. we will also be much more lower than what we had originally estimated in terms of production coming from those minerals. I think you have appreciated the fact that during 2020, there was a collapse of coal production. Clearly, this is due to COVID mostly, but this is going to stay, I think, for the 2021-2022 period. So, well below the 6.6 gigawatt years, much more below the Terawatt hours targeted by 22, I think it was 5 terawatt hours, something like that, by the end of 22.

Okay. Alberto, there is a question for you on the edging for 2021, if you can just provide us an update.

Okay. Yes, we have had some progress in the 2021 hedging. Italy is now around 70% hedged from 50% in the first quarter. Spain is around 90% hedged versus 80% in the first quarter. And as you remember, these projects are also based on the fact that our price-driven production, the production from renewables and nuclear, is always naturally hedged through the retail customers.

Okay. There's a question around the drop in volumes across different Latin countries. In particular, what we expect

I have some trouble with my earphones, okay. In South America, energy demand dropped 6% versus the previous year, with different impact on countries. Peru was down 10%, Brazil down 7%, Chile and Colombia 5%, Argentina was almost in line with the previous year. We expect for the second half a gradual recovery of energy consumption. something that we are already experiencing in June and in July with the last numbers that we are having are so pointing at a gradual recovery in the consumption.

Again, a question for you Alberto about networks. If there is any regulatory risk that might be taken into consideration?

Well, no, I think that we have a good visibility of regulation. Regulation activities will continue in line also with the – so already defined across countries. It's clear that we have some additional requests to regulators. So what is happening in Brazil and in other Latin American countries is relevant to us. This is something that we have to follow strictly. For the normal way of the regulation improves, so the regulatory period, there will not be any major changes. In Chile, the consultation process for the next graduate cycle is ongoing. In Colombia, tariffs have been issued and came in line with expectations. And also in Romania, we have the new WAC defined that is now 6.4. It was expected at the beginning 6.9, but 6.4 is in line with our assumption in the business plan.

Okay, great. We move to the last type of question on business. We move to retail. Theo, for you. Interesting question about the future. What structural changes to power mix is management considering, given the possibility of more working from home and online retailing versus office power demand and high street retailing? Could this represent a significant change in the mix between B2C and B2B, and how would this impact NR?

Well, this is kind of... logical question supposedly if we project ourselves for many years in a world like the one we've been living in the last few months, which is pretty tough to consider because I don't think this is a sustainable situation over the long medium term. So it is intellectually interesting, and I think it might happen to some extent, but probably not all of a sudden. and not as deep as we have observed today. There will be a bounce back. That said, I think we have all the tools to observe and adapt to that. You know, we have a very diversified and large customer B2C base, and therefore, if you think that this is a scenario that looks like possibly, then the B2C customers become even more important than they were they are today. So overall, this is net positive for anyone that has a very large B2C percentage in its portfolio customers. That said, to say that B2B is dead tomorrow, that is a little bit exaggerated. But directionally, if I buy this as a scenario that can have its own validity and we are focusing on it, it will be something that we will consider also in the next three-year plan or longer than 10 years' plan.

Okay, Alberto, a list of questions regarding the marginality and the volumes on the retail business, particularly in Italy and Spain. The first one says, can you provide a breakdown of B2B and B2C for Italy and Spain and elaborate on the movement observed in the third quarter? Imagine the volume.

Okay. First, Italy. Power sold in Italy is down 6% year-on-year. B2B segment is down 10% and B2C segment is up 9%. This is Italy. In Spain, the overall volumes are down 11% and This is driven by the B2C segment that is down 14%. B2C is slightly decreasing, so it's down 1%. So two different situations for the B2C business in the two countries. So as you can see, the contraction of the industrial activities is the main driver. The economic impact of these shifting volumes is limited because these segments run on completely different marginality. So the marginality on the B2B is the lowest, and so the B2C is the highest marginality that we have in our segments.

So I would say that probably with this last part of your answer, you provide also color on the following question regarding margins for B2B and B2C in Italy and Spain. I think the next one is quite interesting and it goes back to the science of recovery. Is there any science of recovery for electricity demand in Italy and Spain?

Well, the answer is yes. So in April, we saw a a reduction of around 30% in the consumption of the B2B segment, while B2C increased for the large scale of smart working. In June, B2B in both countries' consumption was down 12%, so with the first clear signs of recovery. In the first three weeks of July, we see a further improvement in demand in European countries and also in Brazil, in Peru and Latin America. So all the countries in which we work have seen evident recovery in June and July.

Okay. The next question aims at understanding how the commercial portfolio moved during the COVID crisis. And the question is, how did the commercial portfolio change over the past half in terms of customer acquired and lost?

Alberto. Well, yes. So, we see the operation continue to work properly. So, we have a stable commercial portfolio in Spain, while in Italy we ended up with the having a slightly higher portfolio of customers. After the initial slowdown, the acquisition of customers rolled over in the last two months, and also thanks to the easing of restrictions, and also to deployment of new commercial campaigns that bring the acquisition level almost in line with the previous year.

Okay, again, I think I'll start it for you. The churn rate, what was the level of churn rate and if the level we observed in the first part was in line with our expectations?

So, in Italy, we recorded a small increase in churn rate. This is in line with our expectations. I remember that inelchar rate is absolutely under Italian market average. In Iberia, we also registered an increase of power market churn of approximately 0.7 points versus the end of 2019. We are working in the two countries in the range of 10-11% of churn rate.

Okay, last one on retail. First house indicated that the entire free market customer base reached 9.4 million. Is your 18.5 million target to 2022 still valid? Alberto, I think it is again for you.

Well, assumptions of doubling customers in the free market are underpinned by the elimination of the regulated tariffs by 2022. and therefore associated to a specific timeline. In any case, the line is like a game of spoon. We don't see that we must see an economic impact on our accounts because the assumption we have is that the time in which we will treat the market so the regulated tariff will be consult. We will lose roughly 50% of the regulated customers we are serving today. And it's more what we are doing. We are doing better than this in moving our customer base along the years from the regulated business to the liberalized one.

Okay. Now, four quick questions on financials, and then we will go to the next. last minute question coming from our email address. So Alberto, four questions for you. Cost of debt is down 70 bits versus 2019. Can we expect a steeper reduction versus climate sanctions?

Not for this year. So we don't expect further decrease this year. So it's clear that we will continue in doing our liability actions to reduce the cost of debt that's in line with what we said in our recent study.

Okay, another one, really quick. Can you provide more color on the reduction of cash over the period?

Now, we have cash of 6 billion euros set down, which is for the year 2019, 6 billion euros Billion euros is the normalized level of cash we work with. The level of 2019 was higher, 20 to 3 billion euros, because of the three financing activities that we carried out at the end of previous years.

Okay. Then a question on provision reversal in Spain. Does it still account for the same amount as in first quarter? Any compensating items, I'd say, in the second quarter?

It accounts for the same. There are no compensating items emerged over the second quarter.

Last one on financials. What is the impact on your bad debt provisions, and what are the measures that will be implemented in order to recover it?

Well, as I said, the debt provision, we reported an increase of €130 million. As I said, maybe given by the top of funding activities. The overall impact is still evolving in light with various COVID factors related to pandemic and unpredictable future evolution. Across all countries, we have put in motion manageable action and we are engaged in discussion, as said, with the regulators to try to fully compensate the impact through regulatory measures.

Okay, now I would move to the Q&A that came through our email last minute.

CD 334-399...

Hello? Hello? Hello? Hello?

Hello? Monica, we can hear you.

Okay. Perfect. Now I can hear you. Sorry. My line dropped. It's okay. I was saying, how can renewables growth be accelerated in Italy for additional investments to help with the post-COVID-19 recovery? So Francesca, I think that's for you.

I think this is a question that is valid for Italy, but also for Spain and other countries in Europe in general. I think it is not so much an issue of funding, but it is an issue of resources. the bottlenecking, the permitting phase on one side, and improving the interconnecting infrastructures and networks, medium voltage, low voltage, and high voltage network interconnectivity. These are two things that need to happen. The first one is more on legal and regulatory matters. The second one is more on infrastructure investment, which is part of the efforts that we are placing in front of the various governments and therefore the EU. We have the two speed up the reinforcement of networks to prepare for this. So it's more administrative and infrastructural on the network side than the plant themselves. There is a backlog of investments just waiting for things to unfold.

Okay. Another one for you, Francesca, I think. How large is the opportunity to step up investments over the next year to do the change policy environment? Do you foresee an acceleration towards more capital recycling in your renewable model?

You know, we never really did capital recycling because we don't have that need. The question is we have been selling renewables because they make sense in terms of value creation. So in a way, there were people seeing a different value in the cash flow streams that the same plant was generating vis-à-vis our view. That's the only reason why we sold generation plants and renewables. And that can happen also in the future. I mean, every time we see this potential value creation, we'll use it. Maybe with the only exception of those places where we have an integrated position on the customer side, so we need generation to be fully hedged. That's the only exception to the rule. On acceleration, I think there is definitely the potential to do that. Not a lack of opportunities, but rather, let's say, a need to cover large parts of the world that are still verging from the standpoint where we are today preparing for additional growth. So it's a very exciting space.

Okay, Alberto, for you, question number three on kind of a specification to be more specific on the guidance. Can you please clarify if the 5.2 billion euro net income includes one-off costs that are supposed to compensate for the provision release recorded in the first quarter in Iberia? or if the guidance includes only the positive contribution from the provision released?

Well, guidance and income this year is based on several assumptions associated with operating performance and I said also with the improving of the situation related to the debt and other things. What I can say that the bottom part of the range in these projections to be absorbed, then if we put the position to this indicator.

Okay. There is another question number four on the effects of functions on which our new guidance is based. I think we can... provided this number to the analyst for this one. Question number five, again on the guidance, business countries where the EBITDA guidance has been changed.

If we compare our guidance versus business plan, business plan lower EBITDA mean the effects will result in Latin America. Here, so the main changes are related to effect on effects rates. And on the other end, effect may be concentrated on the potential impact on infrastructure and network everyday uses. What I might say, is that at the end, we foresee that European countries will compensate some impacts related to coming from the Latin American business, and the only part of the EBITDA not recovered will be composed by the effect depreciation at the end of the year.

Okay, a question. Number six, I think it's for our CEO. Should we assume the guidance cut through 2021? I presume we want to wait until the CMD, but you can give us some directional guidance. Should we now expect a lower number for 2021?

No, I think it's too early to do that. I don't think you should expect a lower number for 2021 because we had the COVID in March and April 2020. So I think it's a bit exaggeration. So no, the answer is simply no. Just wait until the CMD and don't extrapolate unnecessarily negatives too long.

Okay, I think we are close to the really last question, which is about the focus on sustainability SDG bonds. And given S&P recent indication about SDG hybrids, do you think that hybrids, green bonds, could fit your strategy, Alberto?

Well, I would say that... Hybrids have a different nature because they have this equity content. So for this, and because the discussions are still ongoing with the rating agencies, they have not been considered and included in our target of sustainable finance debt. They today are out. Notwithstanding all this, we are discussing with rating agencies to understand the way in which also these instruments can be included in the future in the sustainable finance portfolio.

Okay. I think this is actually the last question. We covered them all. If we need anything, as always, Myself and the entire investor relations team will be at your disposal. I think we can just wish you a good summer break, and we'll be back in September. Thank you to Lucio and CSO.

Thank you, everybody. Thank you. Thank you. Bye-bye.

Thank you.

Bye.