Enel SpA (ENEL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to Enel 9 months 2021 results. [Operator Instructions] I would now like to hand the conference over to the Head of Investor Relations, Monica Girardi. Please go ahead, ma'am.

Thank you. Good evening, ladies and gentlemen. A warm welcome to our 9 months 2021 results presentation, which will be hosted by our CFO, Alberto de Paoli. In the presentation, Alberto will provide some highlights of the period, and he'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 email at [email protected]. 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.

Thank you, Monica. Good evening, everybody. Let's start with the highlights of the period on Page #1. The operating dynamics of the first 9 months of the year showed a trend of significant recovery with industrial rebound now clearly visible. The turnaround across all KPIs has accelerated, starting from the first half of the year, and the growth curve is now lending at a level which is back to the pre-COVID-19 period. Investments are up double digits, in line with expectations, demonstrating once again our deployment capabilities that will fuel future growth. Thanks to visibility, we made significant progresses in the renewable installation by building 4 gigawatts of capacity over the last 12 months. And in light of the predictable evolution of the business, we can, therefore, confirm our targets for the year, including the guaranteed EPS of EUR 0.38 per share for 2021, which implies a 5% dividend yield at current price. On Slide 2, now we dive into some industrial KPI for the 9 months. As you can see in renewables, the additional build capacity was equal to 2.3 gigawatts, up by 35% versus 9 months of 2020, and positioning us ideally to close the year with more than 5,000 megawatts of new builds. On networks, volume distributed continued to grow and stand now at 382 terawatt hours, up by 6% versus previous year. In customers, electricity sold in the free market increased for the third consecutive quarter this year, up by 9% versus previous year with 139 terawatt hours sold over the period. The industrial performance has been incredibly strong, while overshadowed by temporary headwinds and FX impact, and now I'm on Page #3 where you can see that ordinary EBITDA overall is down 4% year-on-year. Worth to open the performance in 3 main blocks of analysis to make a clean comparison vis-a-vis last year: first, the performance has been affected by the normalization of nonrecurring items. I want to remind you that last year, we booked around EUR 640 million positive nonrecurring items, mainly associated with the provision reversal in Spain and the resolution #50 in Italy; second, numbers are impacted by EUR 300 million of FX devaluation, mainly due to the weakening of Brazilian real; third, we faced some temporary headwinds worth around EUR 600 million in total, of which EUR 300 million from lower prices hedged in 2020 as a consequence of, in the last year, depressed environment and compression in margins due to the recent spike in prices. Another around EUR 300 million from the severe drought in Chile and the gas shortage from Argentina, and then the effect of the high storm in Texas faced at the beginning of the year. These 3 headwinds have been counterbalanced by the recovery of the operating performance across all businesses line. In particular, the lion's share of operating growth is associated with global power generation, where amongst other effects that I will detail later, the development of new capacity contributed remarkably, the progressive stabilization of the level of electricity distributed in LatAm, coupled with the tariff indexation in particular in Brazil and better volumes dynamics in the retail business, particularly in Italy. By taking out the temporary headwinds faced in 2021, our EBITDA would have remained flat versus last year, so cover the delta of nonrecurring FX impact through the increase in operating results. Let's now see how these moves are reflected in the bottom line. And net income results, I'm now on Page #4, has been affected not only by the headwinds commented at EBITDA level, but also by other nonrecurring items, particularly on taxes and financial expenses that have further obscured the solid operating results. In particular, temporary headwinds from EBITDA had an impact for more than EUR 300 million on earnings. On taxes, we recorded EUR 150 million impact from nonrecurring deferred tax in Argentina and Colombia following the recent change in the fiscal law in these 2 countries. And third, the liability management program put in place to reduce the cost of debt in the next years increased our financial expenses in this year for around EUR 300 million as a one-off. Worth to remind that the liability management program has been executed to partially reabsorb the gain from the Open Fiber deal, which has not already materialized and will be -- will materialize in the last -- in the fourth quarter. The net income trajectory of this quarter is not representative of the full year perspectives. Excluding the temporary headwinds faced in 2021, our net income would have increased by 13%. Deployment of investments continue to be robust. We are now on Page #5. We invested EUR 8 billion in the period, an increase of 21% versus previous year. In the ownership business model. Investments were almost entirely allocated to renewables and networks that total around EUR 3.4 billion each, with the remaining portion deployed on conventional generation and customers. From a geographical perspective, around 70% was spent across Europe and United States, of which 3.9 in Europe and the remaining 1.3 in North America -- in North America and 2.3 was spent in Latin America. We have invested around EUR 450 million through the stewardship business model, focusing primarily on analytics and renewables capacity. And this EUR 450 million catalyzed EUR 1.7 billion of total investments made by our joint ventures together with the third parties involved. Moving now on our global generation business, for some details on the generation business. You see, and I'm now on Page #6, that the total renewable capacity stands now at around 51 gigawatts, approaching 60% of our total installed base, up by 3 percentage points versus previous year. The green repositioning of our generation portfolio is clearly shown by the share of emission-free production that is now at 63%. Renewable capacity built over the last 9 months is equal to 2.3 gigawatts despite the difficult condition caused by COVID. Over the next quarter, we will scale up the magnitude of new renewable capacity addition, and we expect to commission 3,000 megawatts in the last quarter of the year. As of today, 100% of these projects are in an execution phase, of which more than 700 are already built and ready to start production, offering high visibility on their contribution by year-end. Such a remarkable acceleration in future growth prospects are made possible, thanks to our pipeline. I'm now on Page #7. As you can see, as of today, pipeline has reached around 350 gigawatts, broadening project optionality and securing both flexibility of capital allocation and protection on returns. Major pipeline worth around 83 gigawatts, out of which 18 are earmarked for the '21-'23 period and 55 are already covering projects for the 2024-2025 period. Over the last 12 months, our pipeline grew by more than 30 gigawatts and 7 gigawatts entered in the execution phase. The mature and early-stage pipeline dynamics position us optimally for our growth prospects, and you will appreciate during our Capital Market Day presentation in the upcoming weeks. With respect of the 19.5 gigawatts targeted addition for 2021, 2023, we stand at over 70% of the target addressed with around 2.3 gigawatts built year-to-date and around 12 gigawatts currently in execution. The receivable target is covered 3.3x by the related portion of mature pipeline, which translates in negligible delivery risk and high confidence of achieving even more than this. We can leverage on these extensive and well-diversified pipeline also to further push the implementation of the stewardship business model in renewables, thanks to our origination capabilities and crystallizing over time, the value that sits into this large portfolio -- pipeline portfolio. Moving now to the operating achievement on global infrastructure and network. I'm now on Page #8. You see that as of September 2021, volumes of electricity distributed stood at more than 380 terawatt hours, up by 6%, showing a recovery from the dynamics observed in 2020 related to the lockdown. This acceleration has been observed across all geographies, which now stand at the level of electricity distributed in line with the pre-COVID conditions. Focusing on to LatAm, volumes increased 5% year-on-year on average or 5 terawatt hour, driven by Brazil, which increased by almost 3. Digitalization of network remained at the center of our capital deployment with a number of total smart meters installed that reached roughly 45 million of smart meters, resulting in approximately 60% of our 75 million end users digitalized. Now let's take a close look at customers on Slide #9. Our positioning on customer strengthened in the last 12 months, both via our retail traditional operation as well as on services and platform offered by Enel X. Around 1.2 million of new customers have been added in the free market, mainly in Romania due to the end of the regulated tariff and in Italy, which added 400,000 customers in the period. Energy sold in the free market is up by 9% with volumes increasing in both B2B and B2C segment, driven by the economic recovery. Looking at Enel X, the division performed extremely well with double-digit increase recorded in all product lines; more than 100,000 charging points have been added, reaching 245,000; lighting points reached 2.8 million, up by 4%; battery storage increased by almost 60 megawatts; and 7.7 gigawatts of demand response capacity was offered globally. In fiber, almost 30 million households have been passed, up 34% year-on-year. The industrial development goes together with a continued improvement in the active portfolio management activities on Slide #10. You already know that in April '21, we completed the merger and the public tender offer in Enel Americas as we -- and now we own 82.3% of the company. That way, Enel Americas has aligned its corporate structure with the other subsidiaries of the group, unlocking synergies and reducing operational and financial risk. This will translate into an earnings appreciation for the group, which we estimate in the tune of 13% at regime. Furthermore, in July, we reached an agreement in Colombia to create a single corporate vehicle that will support growth in the country. And finally, in August 2021, we signed an agreement with ERG, ERG to acquire 527 megawatts of hydro assets for an enterprise value of EUR 1 billion. Following completion of the transaction, the group will reach around 13 gigawatts of wider capacity in Italy, progressing further in the decarbonization of the generation portfolio. Worth to mention that these assets are expected to generate EUR 100 million in EBITDA. We foresee the closing at the beginning of 2022, once all of the regulatory approvals have been obtained. And now let's open the session on financial results, and I'm now on Page #12. EBITDA stood at EUR 12.6 billion, decreasing 4% year-on-year and net income came at EUR 3.3 billion, decreasing by 8% versus previous year. As already explained, the performance of both has been affected by temporary operating headwinds FX and one-off items, which overshadowed a strong underlying performance. Similarly to EBITDA and net income, the FFO for the 9 months has been suffering from temporary headwinds, but also from EUR 2.1 billion working capital burden coming from the regulatory measures implemented in Italy and Spain to smoothen the impact for customers of the spike in power prices and from other economic headwinds in Chile and Brazil that I will detail later on. Net of this impact, FFO would have increased by more than 20%. Moving now into deeper analysis. We are on Slide 13 on global power generation. Global power generation ordinary EBITDA stood at around EUR 4.8 billion, down by around EUR 300 million or 6%. Results have been supported by the positive contribution of new renewable capacity installed, coupled with an increase in renewable volumes for around EUR 300 million. Positive contributions has been more than offset by some negative items detailed as follows. Around EUR 290 million due to the persisting growth and gas shortage in Chile; EUR 200 million associated with the price dynamics affected by lower hedging prices, mainly in Italy and Spain and the normalization of ancillary services, mainly in Italy; and around EUR 150 million from currencies devaluation, mainly in LatAm. Worth to highlight that the negative price effect will revert next year. As of today, we have hedged forward 97% of 2022 production at prices that are higher on average, EUR 6 per megawatt hour than the ones of 2021. The negative impact from the growth in gas shortage in Chile can be considered a temporary headwind, and now we are experiencing some better the conditions in Chile going forward. And considering all of this and the increased contribution from new renewable capacity installed, we see the growth trajectory of the renewable part of the generation business to come back, supporting future targets. Let's now take a look on our infrastructure network on Slide #14. Ordinary EBITDA for networks stood at 5.4, down 7% versus last year. Net of the nonrecurring items accrued in 2020, the performance year-on-year is broadly flat. Focusing on the activities in Latin America, the performance is up by 3% year-on-year as a result of almost EUR 60 million associated with the higher electricity distributed across all the Latin American countries with Brazil contributing for around EUR 45 million and EUR 140 million related to tariff indexation mainly in Brazil. These positive items were offset by EUR 30 million associated with the higher maintenance cost, mainly in Brazil due to better weather conditions and EUR 120 million negative impact from currencies devaluation in LatAm. In Europe, EBITDA stood at 4.2, decreasing 9% versus last year or EUR 400 million. This is mainly due to EUR 100 million plus associated with investments, EUR 100 million negative associated with regulatory adjustments in both Italy and Spain and EUR 450 million negative impact of nonrecurring items, that is the provision reverse that we accrued in 2020 together with the solution #5 in Italy. And then on Page #15, we move on retail, where you can see that EBITDA reach the EUR 2.4 billion with a full recovery from the extreme conditions experienced in 2020 associated with the COVID-19. The group expanded its free market customers of 1.2 million customers, as I said -- and as I said on the back of the end of the regulated tariff in Romania and a good increase of customers in Italy. Looking closely at EBITDA, free market EBITDA is up by 10%, driven by better performance in Italy, mainly attributable to a 9% increase in volumes in the free market. In Italy, EBITDA increased 15% year-on-year and around EUR 200 million, driven by a pickup of volumes in both B2C and B2B segment and a better marginality with unitary margins up 4% versus last year. In Iberia, net of nonrecurring items, EBITDA is almost flat versus last year on the back of stable volumes and margins. Romania retail EBITDA increased around 20% due to the end of the said regulated tariff. Regulated market EBITDA is down around EUR 130 million on the back of the decrease of the regulated customer base, both in Italy and Romania. OpEx per customers proved flat, while Enel X EBITDA increased 3x versus 2020, reaching more around EUR 200 million, driven by energy efficiency programs and customer needs of energy flexibility services. In the next slide, we will show in detail the earnings evolution during the period. I'm now on Page #16. We have really detailed most of the moving parts resulting into the performance of the bottom line. I will, therefore, just comment what is left in this chart. So D&A, that decreased versus last year as a consequence of currency devaluation and lower bad debt accruals related to COVID-19 and Resolution 50 recorded in 2020 which more than offset the increase in the level of investments deployed during the period. Financial charges are almost flat year-on-year despite the EUR 400 million negative impact related to the liability management transaction executed in June and July and which are part of the liability management program completed in October. The debt refinancing strategy carried out during the last 12 months, reduced in this year by 10 basis points, the cost of debt leveraging our cheaper sustainable finance instruments and hybrids. And so the vast majority of the cost reduction will be visible the next year. The contribution from equity investment increased by around EUR 80 million. Taxes increased by around EUR 170 million, mainly driven by the already commented adjustment on the deferred tax in Argentina and Colombia, following the recent increase in the nominal tax rate, and minorities decreased by 22%, reflecting the increase in Enel America's stake and the higher contribution of Italian companies. Let's now take a look on our sustainable financial strategy and liability management program, as already mentioned. You see in the chart that over the last months, we put in place this big liability management plan with the aim to further accelerate our sustainable finance path while optimizing the financial structure of the group and further reducing the cost of gross debt. As a consequence, the share of sustainable finance sources increased to around 50%, allowing us to reach 2 years in advance the target we had in 2023. Thanks to these transactions, we refinanced conventional expensive bonds with cheaper sustainable instruments with an average cost of 0.5% and an average maturity of around 9 years. This will generate savings on financial expenses of around EUR 100 million per year from 2022, crystallizing the value of the current low rate environment. Finally, we remind you that this refinancing program has affected the financial expenses for around EUR 400 million in the 9 months while the impact for year-end following the completion of the whole program is expected to be around EUR 500 million. And now moving on the cash flow on Slide #18. As you can see from the chart, FFO stood at EUR 5.1 billion, strongly affected by economic headwinds as anticipated and measures implemented by local governments to smoothen the impact of increasing prices in customer bill. Excluding these effects, FFO would have accounted for EUR 1.8 billion, increasing around EUR 2 billion versus previous year, with a cash conversion of 64% compared to 50% in 2020. The dynamics underlining the FFO evolution can be summarized as follows: higher EBITDA after provision mainly related to lower bad debt accruals year-on-year; net working capital, minus 3.1, impacted by around 2.1 of temporary items on the back of the measure implemented in Italy, Iberia and Brazil; net of these effects, the working capital is in line with the seasonality of our business and includes items to be reabsorbed in the last quarter, considering also the profile of CapEx curve; higher taxes paid, mainly due to advanced settlement tax payment at the end of the last year; and higher financial charges paid related to the liability management program executed in June and July and that has been completed in October. Discussion on the reabsorption of the temporary measures are ongoing to mitigate the cash impact. And now take a look at net debt on Slide #19. The net debt of the period lands at EUR 54.4 billion and includes 2 accounting adjustments that nothing has to do with the operating performance of the company such as leasing contracts and FX. Net of them, the net debt would stand at EUR 52.4 billion on the following operating dynamics: positive EUR 5.1 billion impact on FFO already commented; investment deployed for EUR 8 billion; dividends paid for EUR 4.8 billion; and active portfolio management activities, mainly related to Enel Americas PTO. In the period, we accounted this equity about EUR 2.2 billion of hybrids. Gross debt stand at 67.7, increasing by 15% versus December 2020 as a consequence of the already mentioned dynamics on net debt. And now some closing remarks, and I'm on Page 20. We had a solid and visible recovery on the operating performance and has continued in the third quarter of the year, in line with expectations and with the recovery post COVID-19 fully on track, supporting the delivery of our targets for full year 2021. The managerial action implemented on the minorities reduction in LatAm, coupled with the organization in Colombia as well as the liability management program to refinance debt at lower rates will unlock value in the near future. The growth trajectory of our investments is confirmed, and it is progressing at full speed, creating a visible path for future growth. And looking at foreseeable evolution of the business, we are happy to confirm our 2021 full year target for both EBITDA and net income, reiterating our commitment in paying an EPS of EUR 0.38 per share. Thank you for your attention, and let's now open the Q&A session. And Monica, the floor is yours.

Okay. Thank you. Alberto. We open the Q&A session. I want to thank all of the analysts that sent the question during the live session. I tried -- I did my best trying to pack them all, so I will also filter a little bit them to say, speak on what we can save in 3 weeks away from our CMD. So they will be mainly focusing on the 9 months. I will start with the session -- section focusing on global power generation. The first one is the following. Additional bed capacity is at 2.3 gigawatt. What is your expectation for year-end?

Well, I said so in the presentation, now we are now working on around 3,000 of plant. So we see 5,000 or more than 5,000 megawatts at the end of the year.

Okay. The second question is about commodity price spike and capacity under construction. So is there any impact from the commodity spike price and on the capacity under construction?

No. We don't see -- so for the plant now that we are also delivering this year, we see no impacts coming from the recent price spike. Now we are working on vendors and suppliers, also to have different way of contracts and to help them also to serve this period. So we don't have any impact for this year, and we don't see any meaningful impact also for the next year coming from these effects.

Okay. We talked about the temporary effect on prices. So can you provide an update on your forward sales? Did you change your strategy in reaction to the current environment on prices? And the different actions undertaken by the governments?

Well, first of all, as said, we don't change our strategy, because our strategy pointed already in the good direction. So worth to mention that the whole structure of the Spain intervention was based on the assumption that we were making extra profit selling the energy to the new prices, while also we -- from years, we don't do this. We hedge our production with our customer base and we fixed prices 1 year in advance, so following and closing our integrated margin. So having said that, strategy is correct. And we -- when it comes to say what are prices and our hedging strategies, I would say that we are -- in Italy, we have already covered 100% of our production for the next year. And we have -- we are already at 40% for 2023, and we are working at prices that are also on the range of EUR 10, EUR 15 higher than the prices that we hedged for 2020. In Spain, we are now working 90%, 2020; and 30%, 2023. Prices are higher than the hedge prices of around EUR 5.

Okay. Conventional generation capacity remained flat versus the 6 months. What are the projections for the year? Is the coal phaseout plan confirmed?

Well, in Italy, we have received authorization for the shutdown on Fusina 1 and 2. So we will proceed in -- with the closure activities in the next quarter. In Spain, we have received the authorization for the closure of Litoral. And we are expecting some administrative confirmation for As Pontes points. So there are the 2 plants of totaling 2.5 gigawatts of capacity to be shut down. Now we work to do it and to close these 2 plants in the fourth quarter. Worth mentioning that we have to comply with the system needs that are requiring some degrees of security in light of the stoppages of the nuclear plants that is planned in November as well as potential disruption because of the present situation. So we are working for the full quarter. So we hope that the system will give us the final green light to fully close these 2 plants.

Okay. I'm allowing a small leakage into 2022 and 2023 here, as I don't think we are leaking -- or giving any anticipation. So the question is can you provide more color on the 5.5 gigawatt needed to be fulfilled, the planned target of 19.5 gigawatts? When do you expect to deploy the capacity? And how much of the 2022, 2023 are yet to be secured?

Well, as said, so we said, first of all, that we have at least 12,000 of megawatts under execution and then so the coverage of more than 3x for the receivable part. When it comes to this residual 5.5, let me say that almost, say, 70% will be deployed in Europe, the 30% outside Europe. And 2022 is fully secured because we have already 96% the project of 2022 under execution, and we are working on 2023 with 45% of plants under execution. So all these items together are giving us a very easy situation to complete and also to increase the rate of development in the next year.

Okay. The question about the -- a composite question around the deal, to be fair. So the analyst is asking what's the expiry date for the concession? And when is the termination of green certificates? What is expected to be the normalized contribution at EBITDA level? And can we assume the EBITDA to be an upside versus the current plan?

So the expiry date of concession is set at 2029 together with all the rest of our hydro portfolio. Green certificates are set to expire in 2025. And we expect a normalized contribution of EBITDA around EUR 100 million, EUR 110 million, with a possibility to have higher. So in this period, the price is higher than the normal level. We may also seek better results in EBITDA terms. And this is an upside for sure versus the current plan because it was not foreseen before.

Okay. Lots of questions around the current situation in Latin America, particularly looking at the drought in Chile and in Brazil. Many analysts are asking if you can share with them an update on the situation.

Okay. So first of all, the drought has different effects in the 2 countries affected, so Chile and Brazil. Chile is suffering with the economical and financial impact while Brazil is only suffering in terms of financial impacts. When it comes to Chile, the situation end of October proved to be far worse than the condition experienced 20 years ago on the previous severe drought in Chile. And in this quarter, in the third quarter, the situation worsened a lot versus what we had in June. Now after September, we are seeing some signs of recovery that will trigger, I don't say, a full normalization because this year is impossible, but a quarter-by-quarter normalization into less severe situation. We are working with the less -- so with the 3 terawatt hour less on average. So there is a ranging of 25% to 30% of lower production. The -- in Chile, together with these growth effects, remember that the second black swan was that gas normally coming from Argentina was not available in the period of the peaking of the growth effects. And so throwing prices at incredible price, impeding ourself to produce with our thermal plant and so forcing to buy in the market at these prices to serve PPA a very, very low price. This is the overall impact that worth around EUR 300 million. In Brazil, it's different, because in Brazil is also under a severe drought. And so spot price went up almost 5x versus previous year. Here, the distributors has to cover this extra cost, and they will be refunded in the year after the situation. That's why we have this roughly EUR 500 million of temporary impact in the cash flow. Now so Enel and the Energy Ministry are taking into consideration to have an extraordinary intervention and to giving financial support to the distribution within this year, like what they did last year for the Cuenta COVID, the extra aid for the COVID situation, now are discussing on a second intervention to support distributors in this incredible increase in prices and in financial impact.

Okay. The last one on lower power generation is on the pipeline. The pipeline grew again quite extensively quarter-on-quarter. Can you explain the dynamics underneath?

Well, so yes, so we saw a big increase in -- along this year on the pipeline. Now on the early stage, the pipeline is up because now we have closed new agreements with co-developers. There are actors with whom we do the most of the increase in the early stage pipeline. And we had particularly, this increase in Iberia and Europe of roughly 12 gigawatts. And we have also a big increase in new solar project in India, that so we'll deploy and will trigger the new tenders that we will participate in, in the future. When it comes to mature pipeline, now we have 12 gigawatts of new projects that entered in the quarter. And these are more spread around -- so all the countries in which we work, we have roughly 5 gigawatts in South America, 3 gigawatts in Iberia, 2 gigawatts in the United States and also 2 gigawatts in Italy that now is starting increasing the level of mature pipeline ready to be built.

Okay. We move to customers, Alberto. It's a usual question on Italian retail. Do you have any evidence of customers moving out of the regulated time due to the current price environment?

Well, we have not already -- we don't see already this movement. We have a constant rate of migration from the regulated market to the liberalized. But as for now, it is in line with what we experienced in the past. We can't clearly now exclude that an acceleration will happen in the last -- in the fourth quarter of this year and also, we think in the first quarter of the next year. It's clearly, that now, for the first time, we have regulated tariffs higher than delivered -- the free tariffs, both in Italy and Spain. And it may be so a valid reason to move -- to have and to experience the first and force to move from the regulated to the liberalized markets.

Okay. Last one on customers. Customers in the free market have increased by 1.2 million versus previous year. Can you elaborate on the dynamics of the margins. And have you seen any change in the share rate?

Well, on margins, I would say that -- so we saw a sort of stability in margins this year. So we don't see any change in margins. So increase in the overall India and Italy margins. So the increase of the overall margins are mainly related to the increasing volumes in this period. So customers have increased in Italy and Romania. Volumes have increased in almost all the countries. Margins are stable. These are the main reason of the margin increase. Share rate is stable in Spain, and we recorded on a year-on-year basis a slight increase in Italy, not so huge. We are talking about roughly 1.3 percentage point, an increase today in Italy, the share rate is by far, the lowest in Europe and so -- and the lowest also among the market's average in Europe.

Okay. We move into a second -- quite a long section around the financials. So lots of questions around financials. What is the level of CapEx you expect for the full year? How much of the 2021 CapEx has been saved, thanks to the devaluation of LatAm currencies? Has it already been deployed as well?

We expect to close around EUR 12.5 billion. And there is -- so a little bit higher than what we targeted for this year. It was around 12. The devaluation generated a savings, a nominal savings of around EUR 700 million. That has been reinvested in the growth of our renewable asset based mainly in North America. So we increased for EUR 400 million the target we had, and we reinvested the whole effect coming from the FX impact.

Okay. There is a question which goes into the differences between 9 months 2020 and 2021. Can you elaborate on the test and not recurring, both on the EBITDA and net income, which were the component last year and this year?

Okay. As I said in the presentation, so we will summarize once again. At EBITDA level, last year, we booked around EUR 640 million positive associated with the provision reversals in Spain related to the energy consumption for EUR 356 million. And for EUR 273 million, the Resolution #50 in Italy. This is for 2020. In 2021, we booked around EUR 200 million from the positive court rulings associated with the CO2 regularization that's worth roughly EUR 188 million and the hydro cannon in Spain for roughly EUR 40 million. At net income level, the items remain the same, but we have to add at the net income level, the financial impact that is clearly diluted, that at net income level, as said in the presentation, we had added 2 impacts related to the liability program on one side and the one-off impact on deferred tax related to the fact that we had an increase in the corporate income tax in Argentina and in Colombia.

Okay. EBITDA performance versus previous year flattened compared with the 6 months 2021. Can you elaborate on this trend? No, sorry. That's in all -- sorry, sorry, sorry. Just -- it's already answered, because you answered with all the nonrecurring. So I think I can jump this one. Sorry, my mistake. I was doubling the question. So next one, what is your expectation on EBITDA for the full year? Can you still confirm guidance and walk us through the moving parts as we get you there?

Okay, as said, so we confirm our target. This is also a confirmation on the back of the continued operating deployments of the group, coupled with the contribution of the stewardship business model that is expected for the fourth quarter. We continue to see an ordinary EBITDA ranging between 18.7 and 19.3 and a net income between 5.4 and 5.6.

Okay. There is another question that is about the underlying components of the net income. So let me just go back again to the same topic, but I'm reading that. Net income is down double digits versus previous year. Can you elaborate on the underlying components that drive the net income to be more negative than EBITDA on a year-on-year comparison?

Well, so I think I have already answered, because we have -- out of the fact that we have the transmission of EBITDA into net income, and so we have said that what we call the headwinds at the EBITDA level, so it translates into EUR 240 million of impact -- negative impact on net income, then we have the other 2 effects, I said. So the first is deferred tax asset for EUR 150 million and the impact of the liability program that is around EUR 300 million impact.

Okay. Now there is a question around the royal decree in Spain for '21 and 2022. What is the updated expectation on the impact of the royal decree for next year -- for this year and next year?

Well, so we think good news. So the softening of the gas levy is a good news. So we think that is the right way to proceed, recognize that the way in which we act in producing and selling energy in the countries in which we work, not only in Spain, but in all the countries in which we are -- so the right way to properly manage our position and our business in this country, and this has been recognized by the now the amendments of the levy. This preserves us to be impacted by the so-called gas blowback. The other decree is now under -- so the approval that is the CO2 clawback. Here, it's unclear -- the final outcome is clear that so it will be not -- it will not be active in the behavior that I said. So also for the CO2 clawback, the behavior to have direct contracts fixed will perceive the mechanist to act. But so we are waiting to have the -- all clarity and visibilities to all the items of this law. On the other side, so the decree asks for a better communication and detailed communication on the contracts that we sign, and then we are actively working with authorities to provide them with all the needed information to have a clear view on the way we act and exactly the fact that we are not under the law discussion.

Here we go with another recurring one. Closing of Open Fiber deal, is there any update on timing? What is missed there?

Well, we do confirm that we expect the closing deal in the fourth quarter this year. We have already obtained almost -- so the most of the authorization, we call them power. And we know that antitrust, European antitrust is in the final end to define the final judgment. And so we wait and we think that mid of this month, we may have also the final decision of the European antitrust that is the last step before the closing of the transaction.

Okay. Net debt is up by more than EUR 3 billion versus this semester. Was this level expected? What is the projected level of net debt for the full year?

Well, this year, so the main items that have affected the debt is what we called all the measures adopted by different governments to soften the price spike. It is the sum of what happened in Spain, in Italy and also in Brazil. And this has explained the most of the valuation. What I say is that the final level, so we think that we may stay in the range of the value that we have today. So we have a little increase related to the increase in investments, but not meaningful differences. But on the other side, it may depend on what governments will decide in the last quarter and to prolong or not or to make some intervention to soften the financial situation of utilities related over this period. If not, we think that we will stay in the level we have with some little increase. In other terms, we may have some significant difference following what the different governments will decide.

Okay. I think you partially answered that, but just to make sure that the message is clear and I'm reading also kind of associated question, regulatory measures in Italy and in Spain have impacted the cash flow. Can you provide more color on this? How do you see the working capital moving in the last quarter?

Well, yes, I think I have already answered. So the overall impact of FFO related to these measures in Italy and Spain is around EUR 2.5 billion this quarter, and because Brazil is almost EUR 500 million, and it completes the EUR 3 billion impact we have. Well, as said, it depends on the last quarter. So this effect will be reverted at the time in which the government will decide that they suffered to come and to reduce the bills will not anymore need because we will experience a decrease in the power prices. That time, we will get back on the normal level, so increasing our FFO of around EUR 3 billion. If it will happen this year or the next, I don't know. So looking at the situation, it's more possible that it's going to happen next year versus this one. So we will see in the next quarter what is going to happen.

Okay. There was a question coming in on the current cost of debt, which I think we have answered during the presentation. So next one is on the liability management. So do you think there will be more liability management for the year? If yes, to what extent? What is the upside versus the kind of liability management done there so far?

So the liability management, we have completed the program for 2021 with the last tranche that we did in October. So it is completed. We expect to have roughly EUR 100 million of lower financial costs starting from 2022 onwards related to this program.

Okay. Last one on that. The FX on net debt is negative despite the general depreciation of currencies against euro. Can you explain why?

Well, it's -- the vast majority of this accounting impact, because I remember that those accounting impacts related to mainly what is the level of the dollar against euro, because we had a change from 1.23 to 1.16. This is the main effects that affect the variation of the level of accounted debt.

Okay. And now moving to a set of question that came through a little bit last minute and that I couldn't pack further. So apologies if I have some duplications here. The first one is about Spain. And an analyst is asking what are our expectations for full year 2021 EBITDA given the recent developments on clawback. And there's a comment that fixed price contract will be exempted from the application of the CO2 clawback. Which is your view on the possibility that the current proposal made by the Spanish government could be amended?

Well, I think I have already commented. So I also look at -- yes, as anticipated, yes, we can confirm the targets that we have on Spain for 2021. And as said, so for the CO2 clawback, so further changes are expected. And as said, we can assume a similar treatment of this levy on the CO2. So also there, also for the CO2 clawback, exemption will come if you have fixed price contracts with customers. So what we -- so we are waiting for is this introduction of this full price floor. There is, I think, the main point that we need to do to have clarification. And so now that the business is in the parliament, so I think that in the next weeks, we will see the final output of this levy. So this is -- the fixed price contracts of our behavior, protect us, we have to see what this floor does mean in the final numbers.

Okay. The second one I have in the list has been answered so I move to the third one, which says update on your expectations in terms of timing and impact from the new work regulation in Italy. Did you have any recent contracts with ARERA that you could share with us?

Well, so in the last meetings we had with ARERA, the second consultation document was announced for the beginning of November, so in these days. So we are expecting this to be published. And we don't have at the moment further information on the new proposal. So we are expecting for the second document. This proposal will allow us to better estimate the final impact on WACC. What we can see is that we see an open attitude to discuss by the regulator, so we think that we will have a better view for the time of the Capital Market Day where we can so easily give you an update on the second document and together with the attitude that the regulator will show.

Okay. The question #4 that I have in my list is about -- it's a little bit of a general question. So an analyst is asking, what's the possible impact for Enel's business outlook in the medium, long term from the discussion the G20 Summit and the Glasgow conference? Do you see a stronger commitment by governments where Enel operates to energy transition and development of renewable capacity?

Well, in general, my answer is yes. So it's the -- in almost all the countries in which we work, we have a high level of commitment towards full decarbonization, and so the net zero targets. So now we see now the COP26 is in progress. So let's see what the final outcomes will be. But Enel also, the business, so the way we have as a business to support the energy transition that is electrification of consumption and decarbonization of production is the mantra of our business model. And so I think that -- so it's not avoidable. It's the only way to reach the decarbonization needed. Clearly now, we will have to see together with the next generation youth, so we are working on how the single governments that are taking some commitment in COP26 will translate in the next months, this commitment in specific intervention in the specific countries that will allow us to work and to enlarge the business that we are managing, connective buses, electric vehicles, electrification, renewable development and everything.

Okay. The next one is on the outlook for Americas EBITDA in Q4. I would avoid to answer on 2022, honestly. The positive trend that appointed in Q2 and Q3 is expected to continue?

Well, we see a strong trend coming back in the Americas and in Latin America. That is driven by the full exiting to COVID-19 that is not already here, but so the signs are clear. And so we see this trend for the entire 2021 and also for the whole 2022, is pushed by all the business we are working there. So it's pushed because the energy demand is growing fast. It's pushed through the investments we made in renewable development. And with the exception of Argentina, a good regulatory framework with the regulators that take care very well development and also some headwinds like so what we are suffering in Brazil. So the whole things are good for a steady growth trajectory for Enel Americas?

Okay. We go back to a really high-level question. Could you please share with us your view on the current situation of high gas and power prices at European level? Do you expect the current imbalance between gas supply and demand to be structural? The measures indicated by the European Union could determine a normalization of the current market condition, possible timing of the further normalization, threats and opportunities for Enel? Quite a big one.

Well, so if I take some of the -- if we expect the current imbalance to be structural, we think that -- so we are entering winter with a situation that has to be taking care because it's -- so the most -- the period in which we may have some problem. But after winter, and we think that we will see a normalization of the situation because the imbalance between demand and offering will soften in -- after winter. In fact, we have already seen in the last days how the coal prices have decreased, especially for the decision taken in China regarding supply. And also gas price have been reducing level of price, not because an increase in the gas offering but because an increase in the wind production. So we think that these are the first signs of normalization. When it comes to the measure indicated by European Union, they are -- the measure are short-term measures, and I think -- we think are the best way to intervene with a spike in prices that is a spike related to certain conditions that will be absorbed in the future. That is exactly the way all the governments are intervening and now also the Spanish government is using the toolbox to work against these huge spikes. When it comes to Enel, I would say, no threats nor opportunities, because having a different strategy, we don't benefit of these spikes because we don't pass these spikes on to customers. While on the other side, we are not suffering any kind of risk. The only risk that we have suffered this year, because the spike in prices was huge, is that we don't hedge 100% of our retained position because it's impossible to add 100%. We stay a little bit lower than this every month. And this year, because also notwithstanding the very, very low level of non-COVID energy sold, we had to buy it in the market at this incredible high prices. And this has reduced a little bit the -- our margins because of price spikes. This is the only effect that we had.

Okay. And then a question around the guidance for full year. What are the new EBITDA net income guidance -- actually, we confirm what we gave. But an analyst wants to know which are the one-off -- the nonrecurring items that this guidance will include.

So the recurring items that -- of today that we don't see any other kind of additional recurring items on top of what we had in the first 9 months, so we hedged EUR 200 million. And so in our visibility, we don't have any others for the quarters to come.

Okay. The #7 in my list is a question that takes you a little bit back to the unusual nonrecurring items but probably the market was to have the list really clear and it was probably to repeat. So can we have a detailed list of items that are unusual, nonrecurring in EBITDA and below? Yesterday, Endesa booked 297 million from derivatives. I assume it is there as well.

So for -- I'm going to repeat what are the one-off items...

Yes. I think there are 2 basically pieces here. So from 1 side, the analyst wants to know what are the nonrecurring or temporary items that we highlight in the slide we had in our presentation. And what is the EUR 300 million booked by Endesa, so 2 pieces.

Okay. So for the first -- so I'm going to repeat what I said. So for us, in Enel, we had the nonrecurring guidance are related to the CO2 regularization and the hydro cannon in Iberia. This was, we said. Now in 2020, as said, we have the provision reversal in Spain and the resolution #50 in Italy. They are the 2 of 2020. Now -- and this is what I said before, so only to repeat what are the 2 main items. Now when it comes to Spain, because I got some not clear understanding there, this EUR 300 million are not one-offs. This EUR 300 million are part of a hedging strategy that Spain decided to have this year. There is a hedging strategy to show, this positive on 1 side and negative on the other side. The overall strategy of the short position and the hedging on -- so gas and derivatives has to be seen as the same strategy. So the same strategy together is giving Spain an overall margin of roughly EUR 50 million in the overall hedging activities between short position and derivatives. So looking at different level, 1 one-off, another note, it's not correct. So the overall strategy is the same strategy we do every year that we cover 100% of our position. In this case, we had covered with a different hedging strategy. But if you combine the 2 things together, it gives a final outcome that is neutral in this case because the hedging strategy has been a little bit more positive, is giving an overall result that is not 0, like a normal hedging strategy, but roughly plus 50. So no one-off related to this EUR 300 million. It's normal hedging strategy that we do every year. But this year, we decided to do differently, and so it may seem that they are different things but are the same that we do every year.

Okay. I think we had a couple of questions, 2, 3 questions that have been already answered and they are just repacking of things that we have already dig into. I'm lending to the last one, which is in my list, is number 10. What is the so-called cost for energy transition and digitalization, which are defining the difference between the ordinary and the reported EBITDA for a total amount of EUR 1.3 billion. Can you comment?

Well, yes. So it's along last year and this year, we have decided to create a fund that is called -- an internal Just Transition fund. That is related with funding activities related to the decarbonization and the digitization of the company. Through this fund, we will use these funds to have -- to create Just Transition for all, also for the people that will be impacted by the closure of our coal plants also our thermal plants, like all the people that will be impacted by the fact that the company is digitalizing a lot of processes, making some redundancies because we decided not to have any social impact. These funds will fund the transition along these 2 axes.

Okay. Alberto, I think that this was the last question of a really deep Q&A part of this call. Thank you for being with us tonight. Thanks to all of the analysts that listened in to this call. We will answer the questions that have been answered by all of the analysts directly. Of course, we are here to help you. So if you need any clarification, don't hesitate to ring my phone or the teams. Thank you.

Thank you. Bye-bye.

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