Alberto

De Paoli:
Monica Girardi - :

Francesco Starace: Thank you, Monica, and good evening, everybody. So, let's look at the highlights of the period. So we are in Chart number 2. Over the second quarter of the year, we have touched the peak of the crisis that is associated with COVID-19 across all the countries we operate in. You will see in the next slide how this context has evolved over the quarter and the extreme scenario that has materialized.

Despite this stressed 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 trends has accelerated. We made significant progresses on decarbonization.

We commissioned 800 megawatts of renewable capacity, paving the way for a new record delivery for early 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 the green power plant. Simplification of the group structure progressed as planned. At the beginning of July, we have reached a 65% shareholding in Enel Chile. We are well on track on the second shared swap in Enel Americas, 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 supported growth in future years. In light of the solidity of our company, we'll reinstate our minimum dividend per share. For this year, minimum DPS is set at €0.35 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. As said and we are now on chart number 3, the market and macro 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 with Latin American currencies devalued significantly since the beginning of the year on average 18% just in the second quarter alone. Brazilian real is one of the currencies that have been -- that has weakened the most. At this point of the year, we don't expect any recovery in the FX rates and we use current levels to project the financial adherence.

So, financially we hear about based on the present FX rates. Electricity demand went further down in second quarter with Italy and Spain making double-digit decreases, widening further the contraction of demand that we have observed in the previous quarter. Spot prices had shown a sharp contraction in the second quarter with Spain and Italy the most affected. We expect this trend to normalize in the coming months along with economies bouncing back from lockdowns and adjusting to a new normal. In July, we are already seeing improvements in demand in the European currencies as well as in Brazil and Peru in Latin America.

Thanks to the integrated 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. Alberto will show you later the impact at EBITDA level and more importantly how this translated into net income impact. This extraordinary environment has put in motion several initiatives to accelerate the economic recovery both on national and supranational level.

The European Green Deal has defined climate plans that stimulate the long-term data perspective. A €1.1 trillion long-term budget reinforced by the €750 billion sources allocated through the Next Generation EU funding, will address promptly the economic and social damage brought by COVID-19 in Europe and we think of a sustainable recovery in the Eurozone. Resources available could support the sector in achieving both short and long-term goals. Thanks to stimulus and new investments made in power infrastructures. We've been bringing renovation in automotive and industrials have sped up in the process of fighting climate change and reaching zero emissions by 2050.

The Next Generation EU could be a further boost to support the green energy recovery and the more fire power in green investment. Furthermore, at country level Italy, Spain and Brazil have already implemented different measures to offset financial distress arising from the pandemia. In particular in Latin America, we expect regulators to be constructive on the discussions regarding the measures to be taken to offset the impact on these distribution companies coming from a sudden drop in volumes. If we move now to slide number 5, which covers investments you could 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 negative situation.

In light of currency devaluation and inflation, CapEx would have increased by 5% year-on-year in real terms, similarly the commitment and the capability of the company to deploy investment for the delivery of industrial targets. Around 90% of total investment was devoted to renewables in Infrastructure and Networks in the effort in the accelerated effort to digitalize grids and reconsolidation of our generation fleet. From a geographical perspective, the 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 2020-2022 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 #6 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 Enel 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 shift in balance towards renewables emission-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 emission-free production quota, we had 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 8, 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 to 2022. It is worth to highlight that one year ago we were at around 73% of the targeted addition for the 2019-2021 business plan, which I remind you entailed the deployment of 11.6 gigawatts, almost three 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 3 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 certain that a 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 and larger diversified pipeline, ensures a profitable growth minimizing operating risks.

So if we go now to the Thermal Generation, you see on chart number 9 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 de-coal process. Enel Generación Chile obtained the authorization to terminate the operation at Bocamina by December 2020. This is three years earlier than originally scheduled, as well as obtained the early closure of Bocamina II 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 two of the Brindisi power plant, which it was expected to happen in January 2021. This progress solidifies our commitment to the de-carbonization of our fleet by acceleration 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 char number 10. Volumes distributed are down 8% overall and across all countries of operation, with the decrease 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 engaging in a discussion on how the economic effects also can be absorbed. Throughout the period, despite operating difficulties our efforts for the digitalization of the grid remains unchanged, bringing the number of second generation of 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 the investment in quality, the SAIDI and SAIFI 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 continued 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 is expected to accelerate further in Europe on the back of the green recovery and electrification of the economy designed for the company. Customers in the free market now at 17.3 million are up by 600,000, with an increase in the customer base 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 Enel X. The division performed extremely well despite COVID-19 and recorded significant progresses 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 6.1 gigawatts of capacity offered globally. Battery installed increased by 36% during the year, reaching up 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. Alberto

De Paoli: 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 half. As said EBITDA stood at €8.8 billion in line versus previous year.

Group net ordinary income grew by 6% year-on-year, it came in at €2.4 billion. This financial performance was achieved despite a strong devaluation of currencies and the impact of the pandemic on both volumes and bad debt that, I will detail later. FFO reached €2.1 billion, down 58% versus last year. The decrease is mainly attributable to movements in working capital due to COVID-19 crisis and some differences in timing versus previous year. 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 FX and COVID-19 means in the semester for our financial results. I'm now on slide 14. As you can see, the group EBITDA was mainly affected by two

negative impacts: €370 million from the devaluation of currencies; and €300 million associated with the sharp contraction of volumes impacting retail activities worldwide and metrics in LatAm. As you probably know there is a discussion ongoing with regulators to find a way to offset mechanism to this situation.

Net of both COVID-19 and FX EBITDA would have been up by around 8% year-on-year. And down the profit and loss we recorded a negative impact on D&A worth €130 million driven by bad debt provisioning accelerating in the second quarter as foreseen. On the group's ordinary net income, the COVID-19 crisis translated into around a burden of €200 million topped up by a negative FX impact of around €800 million bringing the overall impact in the range of €300 million. Notwithstanding these major headwinds our integrated and sustainable business model allowed a resilient financial performance and I'm now on slide 15. As already commented, we reported EBITDA -- ordinary EBITDA at €8.8 billion broadly flat showing a solid improvement of the underlying operating performance despite the adverse scenario.

Resiliency of our European network has been supported by solid regulatory frameworks like in LatAm volumes dynamics have impacted this operating performance as well as we will see later in the presentation. We require a coordinated and decisive action to be taken by the LatAm regulators in order to tackle the current emergency. On the generation and retail business the integrated margin management has protected the economic results against the market situations. On the next slide, I will focus on the main global business line drivers. And now I am on Page 16.

So before talking about the single business line, I will comment around our progress in efficiencies. As you can see from the chart in the first semester, operating expenses decreased by 7% or more than €300 million, mainly thanks to the efficiencies registered in the period. We recorded efficiencies for more than €170 million well balanced between the retail conventional generation and networks. Thanks to an acceleration of the efficiency plan we are now well on track to reach our target of €1.2 billion accumulated in 2020-2022 plan. Finally, we recall that as already commented during the first quarter results call, the current level of OpEx which amounts to €3.6 billion has been positively impacted also by the provision released in Spain for €356 million.

And now we will go through the details of the operating and financial 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 through the performance of Enel Green Power and the conventional generation. The ordinary EBITDA of the Global Power Generation increased by 9% and reached €3.4 billion. Excluding the impact of FX devaluation in LatAm, performance was up by 15% versus the previous year. The improved profitability of Global Power Generation with a higher share of renewables is highlighted by the 10% increase in unitary margin.

Worth to remember that last year performance included around €100 million capital gain associated with the full consolidation of our North American assets as well as €160 million positive contribution associated with the early termination of a PPA contract in Chile as already highlighted during the first quarter call. This year -- in this year, we had -- the result has been positively impacted by a provision reversal in Spain of around €170 million. Last year €270 million of one-off; this year €170 million €100 million less. In the next two slides, we begin to Enel Green 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, a 1% increase versus last year. Net of negative FX impact EBITDA would have increased by 7%. As mentioned in the previous slide, during the first half 2019, we recorded a net capital gain and -- an early termination of a PPA contract in Chile for a total amount of €180 million. No impact -- one-off impact has been reduced this year. So the operating performance was mainly impacted by the

following dynamics: €100 million coming from the additional capacity installed in 2019; €150 million of increase from the positive contribution of hydro plants performance, mainly in Italy and Colombia; €70 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 FX devaluation of LatAm currencies is in the range of €130 million. 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. As already said, the semester was positively impacted by the provision reversal in Spain that accounts €170 million 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 in Chile for around €80 million. Net of these items, the underlying operating performance has recorded an improvement of 23% year-on-year or around €170 million. And this is mainly due to €150 million, as a positive result coming from the group's short position; plus €60 million resulting from higher prices fully hedged mainly in Italy; around €55 million coming from efficiencies, mainly in Italy and Spain; the FX depreciation impacted by around €60 million of decrease in this business.

Moving now on page 20. You can have a look on the infrastructure and network. Here ordinary EBITDA came in at €3.8 billion, almost flat year-on-year. Net of the €170 million negative impact from currencies devaluation, EBITDA would have increased by 3%. Reversal provision in Spain impacted the ordinary EBITDA for around €180 million; while last year EBITDA was positively impacted by the regulatory settlement in Argentina for around €200 million.

So 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, discussion with regulators are ongoing. And we expect further to what has already been done to offset the financial impact, other actions to be taken to offset the economic impact.

In addition to the volume impact, the main moving parts of the period has been

the following: we added €100 million related to the investments in digitalization and improve the service quality; we added €40 million for efficient systems; we got the tariff indexation in Latin America for €80 million that has partially compensated the decrease in volumes; and then the currency devaluation impacted negatively for around €220 million. 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 drastic shift in Enel's customer base consumption. Notwithstanding this, at the end of a period that we consider the worst of the year, being affected by severe lockdowns in particular in Italy and Spain, retail operations continued to work properly. And while in Spain the customer base remained stable in Italy, we added 500,000 new customers in the liberalized market.

Additionally, around €70 million cost reduction has been reached both in free and regulated markets, out of which €40 million in Italy. Looking closely at the free and regulated markets, the free market EBITDA declined by around €70 million or 5% year-on-year. The decline is mainly attributable to the following effects. In Italy, EBITDA declined 7% or around €70 million due to a temporary long 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, EBITDA declined by 6% or around €20 million on the same temporary long position that are considered for Italy, driven by a decline in electricity sold. In Romania, retail EBITDA increased by more than €20 million on the energy margins. Regulated market EBITDA decreased overall by 1.5% or €10 million. And now that we have gone through 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 or plus 6% versus last year, mainly thanks to lower financial expenses, a better result from equity investments and the reduction in minorities interest which more than offset increase in D&A and higher tax rate.

In particular, D&A increased by around €130 million, mainly refers to the higher level of bad debt accruals related to COVID-19 scenario, for which, discussions with regulators and material actions are ongoing to compensate the impact. The decrease in financial expenses reflects a continuous decrease of the cost of debt, 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, while taxes increased by around €165 million versus last year, mainly due to €35 million for higher earnings before taxes and others for recognition in 2019 of the deferred tax in 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 properties in Italy.

Minorities decreased by 18%, reflecting operating dynamics, mainly in Spain and Latin America and an increase in Enel Américas and Enel Chile stake, 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, strongly impacted by 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, mainly attributable to increase in Bad Debt for COVID dynamics already commented and the Resolution number 50, in Italy. Working capital was impacted for around €2 billion, by the lockdowns in different countries, as already anticipated during the first quarter result presentation. Payment of taxes, last year has been moved to July, so this is the difference in practices always a time difference. Out of the €2 billion 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 stabilized situation worldwide and to the re-absorption of the CapEx curve, leading to a €2.5 billion FFO recovery, from working capital management in the second half. Worth to mention, that ANEEL in Brazil has already approved the measure that will support the re-absorption of around €500 million by the year-end.

Negative free cash flow is a consequence of the dynamics 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 stood at €50.4 billion. Changes are driven mainly by, an increase of €200 million related to new leasing on IFRS 16, the negative free cash flow impact of €2.1 billion already commented. And dividend already paid for €2.6 billion.

And cash outflows related to the further increase in the share of Enel Américas and Enel Chile, through the equities swap. And then we recorded €700 million positive FX impact from devaluation of local currencies against the euro. Its worth to highlight that, net debt at strike price of hedging is €500 million lower. We have already around €4.5 billion of hybrid still full accounted as debt. And in Brazil, we will shortly receive €350 million from the financial relief program, for the distribution companies.

Our gross debt increased by around €2 billion, as a result of the evolution of net debt, which has increased by around €5.2 and the deduction 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, of which €5.9 billion in cash on hand and the remaining €20.6 billion in available committed credit lines. This level of liquidity covers 1.5 times, the debt maturing by 2023 amounting to €18 billion net of short-term debt that is -- will be rolled over. Our credit metrics show a stable level of leverage, notwithstanding the extremely adverse impact on cash dynamics derived from COVID-19, with a net debt/EBITDA ratio at 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 current depressed scenario. And now let me conclude this part of the presentation, driving you through our new financial target for the year, as 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 as the solidity of our business model provides itself once again showing resiliency against turbulences and in extreme scenarios. There is an ongoing expansive effort to offset the impact of this crisis, through discussions with local authorities and regulators as well as through managerial actions. Not all factors can be offset with FX being an exogenous variable and bad debt dynamics associated with broader economic condition 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, EBITDA is expected to come in at around €18 billion, while net income is expected to be in the range of €5 billion to €5.2 billion for 2020. Net debt, starting from €50 billion we have just commented is projected to fall in the €48 billion to €49 billion range depending mainly, to the completion of active portfolio management opportunities that we are exploring. Shareholder remuneration, backed by the €0.35 per share, minimum guaranteed dividend set for 2020 will yield a mid-to-high-single-digit, year-on-year growth, comprised in the range between 7% and 9%. I finish here.

Francesco, I hand over to you, for closing remarks.

Francesco Starace: 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 base and 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-to-high-single digit underpinning an increase in the shareholder remuneration of at least 7% which is further supported by the minimum guarantee of the 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 guarantee, 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. A -

Monica Girardi: Okay, great. I hope the line is getting better from now on as we have some weird noise on the line. So we're now ready for our Q&A session. We keep up as usual with questions we received so far from Emanuele Oggioni, Banca Akros; Harry Wyburd, Bank of America Merrill Lynch; Jose Ruiz, Barclays; Lawson Steele, Berenberg; Meike Becker, Bernstein; Antonella Bianchessi Citi; Andrew Moulder of CreditSights; Stefano Bezzato, Credit Suisse; Roberto Letizia, Equita; Alberto Gandolfi from Goldman Sachs; Javier Garrido, JPMorgan; Claudia Introvigne, Kepler; Enrico Bartoli, MainFirst; Javier Suarez, Mediobanca; Rob Pulleyn, Morgan Stanley; and Oscar Nájar, Santander.

So the first question is for you Francesco, and it's on the full year guidance that has been revised that take into account the FX impact. Do you see any further risk to that?

Francesco Starace: 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.

And should there be further combustions of this epidemic or pandemic then this has to be assessed probably during the fall. See as we stand, 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.

Monica Girardi: Okay. Second question, starting from this new level of 2020, what can we expect for 2021 and 2022 for both EBITDA and net income?

Francesco Starace: So as you know we are working now on the new plan, and we know that this is the plan that we present in November typically. So this November will also be the one.

This plan will take into account the view that we have of the evolution of the COVID-19 through the end of the year and of course the spillover in 2021, 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 we started to seep in due to the actions in particular in Europe that will be put on the market by the new recovery fund. So this is something that we are studying and we're factoring in the 2021, 2022. And we 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 and the typical three-year cycle that we used to give all the people. So I know this is a long-winded answer to say nothing, but basically we don't expect much more than what we have seen in 2020 at this point in the negatives.

Monica Girardi: Okay. We move to the CFO. Net debt guidance changed as well.

What are the main moving parts on the evolution of net debt?
Alberto

De Paoli: Well, as said, so we expect to close in the €48 billion, €49 billion range. It's clear that we have some moving parts already. And the main is the dunning processes, the suspension in all the countries, in which we are. So the very point depends on the deal suspension or if there will be a prolongation of the dunning processes. If everything will go the way we are -- we foresee, we will also recover this €1.2 billion of working capital, leaving €800 million of working capital to be recovered in the next year.

The second point it's clear that we have increased our debt in the first half also because we saw a window of opportunity in buying back Latin America shares in Chile and in the Americas and we did it. So the overall plan foresees some coverage through some disposals that we have in the second half, this clearly depends on the fact that there will be the possibility to close some deals in the second half. If not this -- in this time period we will have some delays in covering this impact and we will do in the first quarter 2021. It depends on how the economic scenario will recover and also the deal-making that we'll be a part.

Monica Girardi: Okay.

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

De Paoli: Well, as said, so the working capital has been mainly affected by missing collection. 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 the -- how all the -- in the single countries are custom 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 easing up in all the countries in July. June, July will be very better in terms of cash-in. So that -- so this is the way, which we have -- we see our forecast further. In this way we will recover the amount I said.

Monica Girardi: 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?
Alberto

De Paoli: Well, in a normalized year, as said what we 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 not zero. And this €800 million will be fully recovered in 2021.

Monica Girardi: Okay. Now, we go back to the semester Alberto and it's again for you.

Can you provide a breakdown of COVID-19 impact on each business segment in the first semester?
Alberto

De Paoli: Well, first of all, I think it's relevant to say that so we are working around an impact of €300 million out of the FX impact. So the FX impact is 100% of the Latin American business. And so, we work with roughly €300 million operating impact. If you split for the first -- the impact in Europe or impact in LatAm, I would say that 70%, 80% of the impact comes from Latin America. So Europe has an overall impact of near zero.

This is because the different business performed in different way, but giving the sense that the integrated position is offering a relief in terms of risk of the business. Going through the different business line, I would say that the distribution business is impacted by around €100 million, 100% Latin America. Retail business is impacted around €200 million, almost 100% in Europe. And I remember that this impact is for the over contraction in that retail as -- is having in this year because they covered the power consumption and now has to resell the part that is exceeding the selling part. And the price -- the spot prices are also 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 -- so 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 bad debt impact that is equally split between Europe and Latin America so 50-50, roughly €70 million in Europe and €70 million in Latin America.

Monica Girardi: Okay. CEO, we go back to you with Open Fiber.

What is the latest on the Macquarie bid for Enel's stake in Open Fiber? Is the €7 billion figure for the whole entity correct?

Francesco Starace: We did receive non-solicited nonbinding offer from Macquarie and that was discussed in the Board of Directors on June 10. After that, we did issue a statement which is everything we can say at this point. So we -- I'm sorry but we cannot give much more -- give many more information than what I just said.

Monica Girardi: Okay. Another one still linked with Open Fiber.

Is Enel interested in selling? And what could be possible uses for the proceeds?

Francesco Starace: Look, we are not particularly interested in selling at this stage. We have commitments to pursue the industrial mission of Open Fiber which is progressing extremely well. And thanks to the Open Fiber efforts that Italy has regained position in the disgraced laggard situation in which it was when Open Fiber started these activities. So, we think we are committed to continue the tabling activities of Open Fiber which by the way creates 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 Open Fiber, but basically anything we have. It depends very much on what kind of offers are put on the table and also on the fact that sooner or later, our mission industrially in Open Fiber will be considered complete. And at that point in any case, it will be a time -- 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 offer. We received that solicited offer that 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.

Monica Girardi: 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 in -- for coming years.

Francesco Starace: 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. As you know, we remain interested in grid acquisitions, so we consider networks to be a very important part of our industrial story.

We are skeptical about launching any schemes and particularly 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 increasing 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 in the market and given the depth of our pipeline. So this is something we are assessing and will be clearly addressed during the -- later in the presentation.

Monica Girardi: Okay. Now, there is a question on offshore. With considerable opportunities opening up in offshore yield, the recurring one the U.S. is batch one, do you see yourself opening up your horizon to include offshore? If so, how would you go about that in terms of gaining or acquiring the technical expertise?

Francesco Starace: 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 have been and 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 do understand both that do everything including offshore because we think it's really beyond 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.

Monica Girardi: Okay. Very clear. 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 Americas soon? And the second question is what would be the endgame once you get to that threshold?

Francesco Starace: 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 would 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 sanctioning stock exchange like Chile.

So we think that is the right position to have for Enel Chile. For Enel Americas, 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 reached that point in order for them and us to do the best to maximize the value of the asset.

Monica Girardi: Okay. We move now to Alberto. There is a second question, which are specifically focusing on Brazil.

So the first one is on the regulatory measure called Cuenta COVID. And the question is how much you are expecting to get out of the regulatory measures and we – when this fund will be available to the company?
Alberto

De Paoli: Okay. So we will get up around €500 million by the Cuenta 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.

Monica Girardi: Okay. The second one is what is on top of that still under discussion?
Alberto

De Paoli: As said, this move is the financial situation of distributors in Brazil. Now what it is needed is to reach an economic equilibrium for concession and so something that will recover the impacts of demand, losses and bad debt. And we can foresee an extraordinary tariff review and a public hearing process that will start middle August.

Monica Girardi: 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?
Alberto

De Paoli: Okay. On lower demand, the impact we've seen in the forecast for lower demand is about €130 million. And so the full or partial recovery of this part is what I said is this is part of the ongoing discussion with the regulator. On the bad debt and working capital, bad debt impact is seen at around €30 million.

And as said, the increase is driven by the freeze imposed on dunning activities and it depends on what the time will be until when the dunning activities will be back. 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 reversed by the Cuenta COVID. So also this is one item that is covered by the Cuenta COVID. And also the overcontracting so the overcontracting in Brazil now is in the range of 6 terawatt hour but it carries no economic impact, because 58% of this overcontracting is covered by the current regulatory framework there and that covers the distributors up to 105% of overcontracting and the remaining part has been covered by the Cuenta COVID.

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

De Paoli: Well to – I recap. Volumes are seeing a 7% decrease year-on-year.

Network Losses, up around 1% and – because of the suspension of inspections aimed at detecting frauds in meters reading. And quality, we are having and we will have a significant improve. We are – so we see a 10 basis point improve in our quality ratios.

Monica Girardi: Okay. Francesco, we go back to you.

Completely different subject. Analysts are asking, if there is any risk on dividend payment?

Francesco Starace: Yes. 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 Enel Americas. You should know and appreciate that having 65% or lower percentage of Enel 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 in Enel 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 or negatives that make us change that policy at all. And don't forget we also have the new guarantee, which we restate that covers the plan period so it will extend until 2022 unchanged.

Monica Girardi: Okay.

There is still for you Francesco. There is a lot 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 Enel to increase the share of renewable investments towards Europe and in Italy in particular?

Francesco Starace: I think, I should add that if you look at where the funds are mostly going they're going to Italy, Spain, Romania. So I mean those three countries are the ones where we are present and therefore we have a big opportunity in that sense.

We think 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. So the whole networks renewable storage triangle is the core of the investments that we had already targeted and there is now an incredible opportunity to accelerate. Coupled with digital so again, networks and fiber optics are also closely connected. Then we'd think there will be an additional boost from private funding not necessarily European funding provided that sustainable finance is 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 when the bureaucracies of the single member states be able to process the amount of work needed in this charge to use this fund in the time period that is allocated by the commission? So that's something where we have to work hard and support all governments of Europe, Spain, Italy, Greece, Romania every one in which we are present and we want to grow to really manage this properly.

Monica Girardi: 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 press release you mentioned a big transformation within generation activities. Can you explain what it means?

Francesco Starace: Well, it means that what we have been doing so far is now becoming extremely evident and it's precipitated if you want in a spectacular way by the COVID-19 crunch on demand. So the term of 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 kind of investments.

And in that transition we will need to address the needs to perhaps have some our colleagues upskill, re-skill and so others gradually being able to leave the working condition and going to retire. 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 we are talking about different time frames because certain countries do it earlier so -- but this is going to be repeated across several countries more or less in the next few years.

Monica Girardi: Okay. Great.

We have now a set of question 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-megawatt shift to early 2021 how the shape of delivery of the 14.1 gigawatts for 2022 will change? Any impact on profitability?

Francesco Starace: 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 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 to the 800 that moved from 2020 to 2021. So we don't see a material impact at all on the 2022 target. Like we said before we're confident in 2020 it will exceed that once we look at the new strategy process that we are going to present at the end of the year.

Monica Girardi: Okay.

Now stay with you Francesco for a really tough question. The Green Deal has kick started also the hydrogen technology. Are you interested into investing into this type of generation source? And what could be Enel's business model on hydrogen? And what level of returns do you see?

Francesco Starace: Look in 2002 so about 18 years ago Mr. Rifkin wrote a book called The Hydrogen Economy. Now 18 years later -- and then 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 the 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 concede 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. Rifkin wrote his book, but they are there today.

So we think it's perhaps the right 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. But it's not a time frame in which you can say in the next three years this will happen.

It would probably happen in time frame between five to 10 years. We think this is something that's we strongly believe can happen as we did strongly believe on the competitiveness of renewables when people didn't have a clue about it. We are not interested in do hydrogen and other stuff because we don't think CCS is the working economically technology. We don't that already. But we are focusing on green and I think it can be probably the success that we all need.

In terms of returns and of course with industrial applications it will have returns that are compatible with the -- in this kind of industry. So we're not talking about spectacular returns but returns that are in the high double digits.

Monica Girardi: Okay. Next question is on -- for your rotational renewables for 2020, Alberto do you want to answer to that?

Francesco Starace: I think Alberto you're on mute.

Monica Girardi: Alberto you're on mute.

Alberto

De Paoli: Yes, yes. Thanks for - I was saying only minor operation are on the study toward 2022.

Monica Girardi: Okay. Hydro availability. How 2020 has been so far? And what is the expectation for the full year?
Alberto

De Paoli: We had Hydro production up 4% versus last year.

And this has been driven particularly by the strong performance recorded on reservoirs during the first quarter of the year. Expectation is aligned with trends experienced in first half with the general scarcity of resources all throughout the year. The technical availability of hydro plants is aligned with the best historical performance.

Monica Girardi: 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.

Francesco Starace: Concessions, okay. Our concessions they weren't expiring at the end of the cycle so we have a 2021 -- 2029 -- sorry 2-9 made for the concession of our large hydro plants. However other players have concessions that have already expired and not renewed on a day -- on a yearly basis. So this is a real problem for some of them.

We think that there is a potential for investment on -- for repowering and enlarging hydro potential in the country. 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. But don't forget investment in hydros typically grow longer time. Today we have a plan that covers about €150 million for the 2022 of repowering activities that will take place regardless of concession expiration because as I said they 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 also 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 and prolong concessions in order to give stability of time, time horizon for additional investment to be unlocked now in the light of the present meager investment phase. So I think it's positive and I think it might happen.

Monica Girardi: Okay.

Good. Last on U.S. Francesco again for you. Do you see a deceleration in ongoing negotiations for PPAs or auctions in these areas?

Francesco Starace: 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 deceleration in 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 change because of COVID-19 at this point. We see robust demand for PPAs on renewable energy basis across the Americas North Central South of course with different time frames depending on the country. But overall no flection there.

Monica Girardi: Okay. On conventional generation -- we moved to conventional generation. Alberto analysts are asking what has been the short position in the first half? How it has evolved compared to first quarter? And what are your expectations for the second half? Alberto you're on mute. Alberto

De Paoli: In the short position, we got in the first half 2020 around €120 million there. This because – so the sharp drop in prices opened these market opportunities.

In the second half it will depend on the evolution of electricity prices. What we see is that we might expect the benefits potentially will stay, so no major changes along the second half.

Monica Girardi: Okay. I think -- sorry go ahead. Alberto

De Paoli: Sorry.

Go ahead.

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

De Paoli: Okay. So this is a different situation. It's mainly as a consequence of the increasing the fleet needs due to the lower demand scenario in lockdown period.

Because of this in the first half in Italy because in Spain this is a pass-through so you didn't account anything from the services. Our -- so it was up €60 million versus last year. Also for this we don't see this trend to change. Situation is going to be normalized and also the needs of extra services is going to go down in the second half.

Monica Girardi: Okay.

There's a question on coal phase out to Francesco. Updated expectations for 2020 in light of the acceleration we have seen in the first half.

Francesco Starace: On 2020, we already gave the figures basically. So we are looking now at what happens after that. So I think Italy and Chile have accelerated.

So we will go at the end of the plan cycle so it's 2022. Remember the plant cycle by 2022, 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 megawatts. So I think you have appreciated the fact that during 2020, there was a collapse of coal production.

Clearly, this is due to the COVID mostly. But this is going to stay I think for the 2021, 2022 period. So, well below the 6.6 gigawatts, yes, much more below the terawatt hours targeted by 2022. I think it was five terawatt hours something like that by the end of 2022.

Monica Girardi: Okay.

Alberto, there is a question for you on the hedging for 2021, if you can just provide us an update?
Alberto

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

Monica Girardi: Okay. There's a question around the dropping volumes across different LatAm countries in particular what we expect for year-end.

Francesco Starace: Alberto? Hello?

Monica Girardi: Alberto?
Alberto

De Paoli: Hello? Sorry, I was just having trouble with my earphones. Okay. South America energy demand dropped 6% versus the previous year with the different impact in 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 for this year having pointing to a gradual recovery in energy consumption.

Monica Girardi: Okay. Again, a question for you Alberto, it's about the networks. If there is a regulatory risk that might be taken into consideration.

Alberto

De Paoli: Well, no, I think that we have a good visibility on regulation. Regulatory activity 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, it's relevant to us. So this is something that we have to follow strictly for the normal way of the regulation improves.

So, the regulatory period. We don't see any major changes in Chile. Consultation process for the next gradual cycle is ongoing. And Colombia tariffs have been issued and came in line with expectation. And also in Romania now we have for the new WACC defined that is at 6.4, it was expected at the beginning 6.9, but 6.4 is in line with our assumption in the business plan.

Monica Girardi: Okay. Great. We move to the last set of question on business. We move to retail. CEO 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 either represent a significant change in the mix between B2C and B2B? And how would this impact Enel?

Francesco Starace: So – well, that's 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. 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 are today. So, overall, this is net positive for anyone that has a very large B2C percentage in its portfolio of customers. That said, to say that B2B is dead tomorrow that is a little bit exaggerated.

But directionally I buy this as a scenario that can have its own validity and we are focusing on it if it will be something that we will consider also in the next three-year plan or longer 10 years plan.

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

De Paoli: 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 B2B segment that is down 14%. B2C is slightly decreasing; say it's down 1%. So, there's two different situation for the B2C business in two countries.

So, as you can see the contraction of the industrial activities is the main driver. The economic impact of this shift in volumes is limited because this segments run on completely different marginality. So, the marginality on the B2B is the lowest and so the B2C is the highest marginality. That is in our records.

Monica Girardi: So, I would say that probably with this last part of your answer you provide also color on the following question regarding margins, so B2B and B2C in Italy and Spain.

I think the next one is quite interesting and it goes back to the signs of recovery. Is there any sign of recovery for electricity demand in Italy and Spain?
Alberto

De Paoli: So, the answer is yes. In April, we saw a reduction of around 30% in the consumption of the B2B segment while B2C increased for the large scale and smart working. In June, B2B in both countries consumption was down 12% so with the first -- the clear signs of recovery. In the first three weeks of July, we see a further improvement in demand in European countries.

And it's also in Brazil, in Peru, and Latin America. So, all the other countries in which we work have seen evident recovery in June and July.

Monica Girardi: Okay. The next question in fact understanding how the commercial portfolio moved during the COVID crisis. And the question is how did the commercial portfolio change over the half in terms of customer acquired and lost? Alberto?
Alberto

De Paoli: Well, yes, as said so retail operation continued to work properly.

We -- so we have a stable commercial portfolio in Spain, while in Italy, we ended up with having a slightly higher portfolio of customers. After the initial slowdown the acquisition of customers moved over in the last two months. And also thanks to easing of restrictions and also to deployment of new commercial campaign bringing the acquisition level almost in line with the previous year.

Monica Girardi: Okay. Again I think Alberto it's for you.

The churn rate what was the level of churn rate? And if the level we observed in the first half was in line with our expectations?
Alberto

De Paoli: So, in Italy, we recorded a small increase in churn rate. This is in line with our expectations. I remember that in Enel churn rate is absolutely under Italian market average. In Iberia, we also registered an increase of our market churn there 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.

Monica Girardi: Okay. A last one on retail. First half indicated that Italian 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. Alberto

De Paoli: Well, assumption of doubling customers in the free market are underpinned by the elimination of the regulatory tariff by 2022 and therefore associated growth-specific timelines.

In any case, if the line is once again postponed then we don't see then a very much again material economic impact on our accounts because -- so the assumption we have is that the time which we will free the market so we will there will the regulated tariff will be absorbed. We will lose roughly 50% of the regulated customer 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.

Monica Girardi: Okay. Now, four quick question on financials and then we will go to the last minute questions coming from our email addresses.

So Alberto four questions for you. Cost of debt is down 70 bps versus 2019, can we expect a steeper reduction versus planned assumptions?
Alberto

De Paoli: Not for this year. So we don't expect further decrease this year and so it's clear that so we will see continuing in doing our liability actions to which really reduced the cost of debt in line with what we said in our original plan.

Monica Girardi: Okay. Another one really quick.

Can you provide more color on the reduction of cash over the period?
Alberto

De Paoli: Now cash we have cash of €6 billion, it was down €3 billion versus full year 2019. €6 billion is the normalized level of cash with we work with. The level of 2019 was higher €23 billion because of the three financing activities that we carried out in at the end of previous year.

Monica Girardi: Okay. Then a question on the provision reversal in Spain.

Does it still account for the same amount as in third quarter? Any compensating items I'd say in the second quarter?
Alberto

De Paoli: It accounts for the same. There are no competitive items emerged during the second quarter.

Monica Girardi: 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?
Alberto

De Paoli: As said bad debt provision we recorded an increase of €150 million except maybe driven by the stop of dunning activities. The overall impact is still evolving in light with various moving parts related to pandemic and unpredictable future evolution.

Across all countries we have put in motion managerial actions and we are engaged in discussion as said with the regulators to try to fully compensate the impact through regulatory measures.

Monica Girardi: Okay. Now I would move to the Q&A that came through our e-mail last minute.

Operator: Ladies and gentlemen please hold the line. The conference will resume shortly.

Monica Girardi: Hello?
Alberto

De Paoli: Monica, we can hear you.

Monica Girardi: Okay. Perfect. Now I can hear you. Sorry, my line is dropped.

So I was saying how can renewables growth be accelerated in Italy for additional investments to help with the post-COVID-19 recovery? So Francesco, it seems that's for you.

Francesco Starace: 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 debottlenecking 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 our -- the various governments and therefore the EU in order to speed up the reinforcement of networks to prepare for this. So it's more administrative and infrastructural on network side than the plant themselves. There is a backlog of investment just waiting for things to unfold.

Monica Girardi: Okay. Another one for you Francesco, I think.

How large is the opportunity to step up investments over the next year to do the changed policy environment? Do you foresee an acceleration towards more capital recycling in your renewable model?

Francesco Starace: We never really did capital recycling, because we don't have that need. The question is we have been selling renewables, because they made 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 in renewables. And that can happen also in the future.

I mean every time we see this potential value creation we will 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 virgin from the standpoint where we are today preparing for additional growth.

So, it's a very exciting space.

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

De Paoli: Well, guidance net income this year is based on several assumptions associated with operating performance. And as said, also -- so with the improving of the situation related to bad debt and other thing.

What I can say that the bottom part of the range in these projections so we absorbed the benefit from the provision position.

Monica Girardi: Okay. There is another question on the floor on the FX assumptions on which our new guidance is based. I think we can provide this number to the analysts that just asked for this one. Question number five, again on the guidance, business countries where the EBITDA guidance has been changed.

Francesco Starace: Alberto?
Alberto

De Paoli: So let's say, if we compare our guidance versus business plan, the sustained lower EBITDA I mean will affect the results in Latin America. Here, so the main changes are related effect on FX rates. And on the other end, as said, it's mainly concentrated on the potential impact on infrastructure and network and retail uses. What I might say is that at the end, we foresee that European countries will compensate some impacts to coming from Latin American business. And the only part of EBITDA not recovered will be composed by the FX depreciation at the end of the year.

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

Francesco Starace: 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. Let's just wait until the CMD, and don't extrapolate unnecessarily negatives to longer.

Monica Girardi: Okay. I think we are close to the really last question, which is about the focus on sustainability SDG bond.

And given S&P recent indication about SDG hybrid, do you think that hybrid green bonds could fit your strategy? Alberto?
Alberto

De Paoli: Well, I would say that hybrids have different measure, because they have this equity content. So, for this -- and because the discussions are still ongoing with the ratings agencies, they have not been considered and included in our target of sustainable finance debt. Today are out on the system and if you notice we are also discussing with ratings agencies to understand the way in which also this instrument can be included in the future in the sustainable finance portfolio.

Monica Girardi: Okay. I think this is actually the last question.

We covered them all. If we need anything, as always, myself and the entire Investor Relation team, will be at your disposal. I think we can now just wish you a good summer break, and we'll be back in September. Thank you to CEO and CFO.

Francesco Starace: Thank you everybody.

Thank you, Monica. Alberto

De Paoli: Thank you. Bye-bye. Thank you.

Monica Girardi: Bye.