Operator: Ladies and gentlemen, thank you for standing by and welcome to Enel Nine Months 2021 Results. At this time, all participants are in listen-only mode. I would now like to hand the conference over to Head of Investor Relations, Monica Girardi. Please go ahead, ma’am.

Monica Girardi: Thank you.

Good evening, ladies and gentlemen. Welcome to our nine 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 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 question only via email at investor.relations@enel.com.

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

De Paoli: Thank you, Monica. Good evening, everybody.

Let’s start with the highlights of the period on Page number 1. The operating dynamics of the first nine months of the year should trend a significant recovery with industrial rebounds now clearly visible. The turnaround across all KPIs has accelerated, starting from the first half of the year and the growth curve is now landing at the level, which is back to the pre-COVID-19 period. Investments are up double digit 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 €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 nine months. As you can see in renewables, the additional build capacity was equal to 2.3 gigawatts up by 35% versus nine 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 industry performance has been incredibly strong, while overshadowed by temporary headwinds and effects impact. And now I’m on Page number 3, where you can see that ordinary EBITDA overall is down 4% year-on-year. I wanted to open the performance in three main blocks of analysis to make a clean comparison vis-à-vis last year. First, the performance has been affected by the normalization of non-recurring items. I want to remind you that last year we booked around €640 million positive non-recording items, mainly associated with the provision reversal in Spain and the Resolution no.

50 in Italy. Second numbers are impacted by €300 million of FX evaluation, mainly due to the weakening of Brazilian reais. Third, we faced some temporary headwinds worth around €600 million in total, of which €300 from lower prices hedge in 2020 as a consequence of the last year depressed environment and compression in margins due to the recent spike in prices. Another around €300 million from the severe growth in Chile and the gas shortage from Argentina, and then the effect of the tax high storm in Texas faced at the beginning of the year. These three headwinds have been counterbalanced by the recovery of the operating performance across all businesses line.

In particular, the lion 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 by the volumes dynamics in the retail business, particularly in Italy. By taking out the temporary headwinds faced in 2021, our EBITDA would’ve remained flat versus last year, cover the dealt of non-recurring FX impacted 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 number 4 has been affected not only by the headwinds commented at EBITDA level, but also by other non-recurring items, particularly on taxes and financial expenses that have further obscured the solid operating growth.

In particular, temporary headwinds from EBITDA had an impact for more than €300 million on earnings. On taxes, we recorded €150 million impact from non-recurring deferred tax in Argentina and Colombia following the recent change in the fiscal law in these two 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 €300 million as a one-off. Worth to remind that the liability management program has been executed to partially reabsorb the gains from the Open Fiber deal, which has not already materialized and will be – will materialized 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’ve increased by 13%. Deployment of investments continued to be robust. We are now on Page number 5. We invested €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 totalled around €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 billion in Europe and the remaining €1.3 billion in North America in and €2.3 billion was spent in Latin America. We have invested around €450 million through the stewardship business model, focusing primarily on analytics and renewables capacity. And this €450 million catalyzed €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 number 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 nine months is equal to 2.3 gigawatts, despite the difficult condition post by COVID. Over the next quarter, we will scale up the magnitude of new renewable capacity addition, and we expect to commission 3,000 megawatt 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 here. Such a remarkable acceleration and future growth prospects are made possible thanks to our pipeline. I’m now on Page number 7.

As you can see as of today, pipeline has reached around 350 gigawatts broadening projects optionality and securing both flexibility of capital allocation and protection on returns. Mature pipeline worth around 83 gigawatts out which 18 are earmarked for the 2021, 2023 period and 55 are already covering projects for the 2024, 2025 period. Over the last 12 months, our mature pipeline grew by more than 30 gigawatts and 7 gigawatts entered in 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 here today 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 in high confidence of achieving even more than this. We can leverage on this 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 number 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 LatAm, volumes increased the 5% year-on-year on average or 5 terawatt hour driven by Brazil, which increased by almost 3. Digitization on 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 on customers on Slide number 9. Our positioning on customer strengthened in the last 12 months, both by 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 Romania due to the end of the regulated tariff 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 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 number 10. You already know that in April 2021, we completed the merger and the public tender offer in Enel Américas and now we own 82.3% of the company.

That way Enel Américas has aligned it corporate structure with the other subsidiaries of the group, unlocking synergies and reducing operational 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 reach 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 to acquire 527 megawatts of hydro assets for an enterprise value of €1 billion. Following competition of the transaction, the Group will reach around 13 gigawatts of hydro capacity in Italy progressing further in the carbonization of the generation portfolio.

Worth to mention that these assets are expected to generate €100 million EBITDA, before 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 number 12. EBITDA stood at €12.6 billion, decreasing 4% year-on-year and net income came at €3.3 billion decreasing by 8% versus previous year. As already explained, the performance of both has been affected by temporary operating headwinds FX one of items, which overshadowed a strong underlying performance. Similarly, EBITDA in net income, before the nine months has been suffering from temporary headwinds, but also from €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 number 13 on global power generation. Global power generation ordinary EBITDA stood around €4.8 billion down by around €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 €300 million. Positive contributions has been more than offset by some negative items detailed

as follow: around €290 million due to the persisting growth in gas shortage in Chile, €200 million associated with the price dynamics affected by lower aging prices, mainly in Italy and Spain and the normalization of ancillary services, mainly in Italy and around €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 €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 conditions in Chile going forward. And considering all of these 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 number 14. Ordinary EBITDA for networks stood at 5.4% down 7% versus last year, net of the non-recurring items are 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 €60 million associated with the higher electricity distributed across all the Latin American countries with Brazil contributing for around €45 and €140 million related to tariff indexation, mainly in Brazil. These positive items were offset by €30 million associated with high maintenance cost, mainly in Brazil due to better weather conditions and €120 million negative impact from currencies devaluation in LatAm. In Europe, EBITDA stood at 4.2% decreasing 9% versus last year or €400 million. This is mainly due to €100 million plus associated with investments.

€100 million negative associated with regulatory adjustments in both Italy and Spain and €450 million negative impact of non-recurring items that is the provision reverse that we accrued in 2020 together with the Resolution no. 5 in Italy. And then on Page number 15, we move on retail, where you can see that EBITDA reached €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 said on the back of the – the end of the regulatory to 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 or around €200 million driven by a pickup of volume in both B2C and B2B segment and a better marginality with unitary margins up 4% versus last year. In Iberia net of non-recurring 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 set regulated tariff. Regulated market EBITDA is down around €130 million on the back of the decrease of the regulated customer base both in Italy and Romania.

Our customers proved flat, while Enel X EBITDA increased 3x versus 2020 reaching more around €200 million driven by in energy efficiency programs and customer need of energy flexibility services. In the next slide, we will show in detail the earnings evolution during the period. I’m now on Page number 16. We have already 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 G&A that decreased versus last year as a consequence of currencies 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 €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 refining strategy carried out during the last 12 months reduced in this year by 10 basis point the cost of debt leveraging our cheaper sustainable financing 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 €80 million, taxes increased by around €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 Américas stake in the higher contribution of Italian companies. Let’s now take a look on our sustainable finances strategy and liability management program as already mentioned.

You see in the chart that over the last month, 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 two 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 nine years. This will generate savings on financial expenses of around €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 €400 million in the nine months, while the impact for year-end following the completion of the whole program is expected to be around €500 million.

And now moving on the cash on Slide number 18. As you can see from the chart, FFO stood at €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 this effects FFO would have account for €1.8 billion increasing around €2 billion versus previous year with a cash conversion of 64% compared to 50% in 2020. The dynamics underlying the evolution can be summarized

as follow: higher EBITDA after provision mainly related to lower bad debt accruals year-on-year, networking capital minus €3.1 billion impacted by around €2.1 billion 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 item 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 in completed in October.

Discussion on the reabsorption and the temporary measures are ongoing to mitigate the cash impact. And now take a look at net debt on Slide number 19. The net debt of the period lens at €54.4 billion and includes two 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 €52.4 billion on the following operating dynamics, positive €5.1 billion impact on FFO already commented, investment deployed for €8 billion, dividends paid for €4.8 billion and active portfolio management activities, mainly related to Enel Américas PTO. In the period, we accounted as equity about €2.2 billion of hybrids.

Gross debt stands 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 that 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 production in LatAm, coupled with the reorganization in Colombia, as well as the liability management program, 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 €0.38 per share. Thank you for your attention. And let’s now open the Q&A session. And Monica the floor is yours. A -

Monica Girardi: 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 stay sick on what we can say being three weeks away from our CMD, so there will be mainly focusing on the nine months.

I will start the session focusing on global power generation. The first one is the following. Additional big capacity is at 2.3 gigawatts. What is your expectation for year end?
Alberto

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

Monica Girardi: 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?
Alberto

De Paoli: No, we don’t see. So for the plant now that we are so delivering this year, we see no impacts coming from the recent price spike. Now we are working on vendors, on 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.

Monica Girardi: Okay. We talked about a temporary effect on prices. So can you provide an update on your forward sales? Do you – did you change your strategy in reaction to the current environment on prices and the different action under taken by the governments?
Alberto

De Paoli: Well, first of all, I’d say, so 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 some extra profit, selling the energy to the – at a new prices, while so we – from years, we don’t do this.

We hedge, so our production with our customer base and we fix prices one year in advance following and closing our integrated margin. So having said that strategy is correct, when it comes to say, what our prices and our hedge strategies, I would say that that we are in Italy, we have already covered 100% of our production for the next year. And we are already at 40% for 2023, and we are working at prices that are so on the range of € 10, € 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 hedged prices of around €5.

Monica Girardi: Okay.

Conventional generation capacity remains flat versus the six months. What are the projections for the year? Is the call, phase out plan confirmed?
Alberto

De Paoli: Well, so in Italy, we have received authorization for the shutdown on Fusina 1 and 2. So we will proceed with the closure activities in the next quarter. In Spain, we have received the authorization for the closure of Federico. And we are expecting some administrative confirmation for as point.

There are the two plants of totalling 2.5 gigawatts of capacity to be shut down. Now we work to do it and to close these two plants in the four 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 fourth quarter. So we hope that the system will give us the final red – green light to fully close these two plants.

Monica Girardi: Okay. I’m allowing a small slippage into 2022 and 2023 here. I don’t think we have leaking – giving any anticipation. So the question is, can you provide more color on the 5.5 gigawatt needed to fulfill the plan target of 19.5 gigawatts? Where do you expect to deploy the capacity and how much of the 2022, 2023 are yet to be secured?
Alberto

De Paoli: Well, as I said, so we said first of all, that we have this 12,000 of megawatt under execution and then, so the coverage of more than 3x for the residual part. When it comes to this residual 5.5 gigawatts, let me say that almost say 70% will be in deployed in Europe and the 30% outside Europe.

And 2022 is really secured because we have already 96% of 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 or so.

Monica Girardi: Okay. There’s a question about the – well, a composite question around the ERG deal to be fair.

So the analyst is asking what’s the expiry data 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?
Alberto

De Paoli: 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 €100 million, €110 million, with 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.

Monica Girardi: Okay. Lots of question around the current situation in Latin America, particularly looking at the growth in Chile and in Brazil. Many analysts are asking if you can share with them an update on the situation. Alberto

De Paoli: Okay. So first of all, the growth has different effects in the two 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 at the end of October proved to be far worse than the condition experienced 20 years ago with the previous severe growth 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 this severe situation. We are working with the less, so with 3 terawatt hour less on average, so that is ranging 25%, 30% of our production.

In Chile together with these 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 effects. And so throwing prices at incredible price impeding ourself to produce with our thermal plant and forcing to buy in the market at this price is to serve with very, very low price. This is the overall impact that revolved around €300 million. In Brazil is different because in Brazil is also so under a severe growth. And so spot price went up almost 5x versus previous year.

Here the distributor has to cover these extra costs and they will be refunded in the year after the situation. That’s why we have this roughly €500 million of temporary impact in the cash flow. Now, so Enel and the Energy Ministry are taking into consideration to have an extra ordinary intervention and to giving so financial support to the distribution within this year like what they did last year for The Quint COVID. So the extra aid for the COVID situation now are discussing on a second intervention to support the distributors in this incredible increase in prices and the financial impact.

Monica Girardi: Okay.

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

De Paoli: Well, yes. So, we saw a big increase 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 activities with whom we do the most of the increase in the early-stage pipeline.

And we had particularly this increase in Iberia, in Europe of roughly 12 gigawatts. And then we have also a big increase in new solar project in India that so we’ll deploy, then we will trigger the new tenders and we will participate 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 party – 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.

Monica Girardi: Okay.

We’ll move to customers. It’s a usual question on Italy. Do you have any evidence of customers moving out of the regulated time due to the current price environment?
Alberto

De Paoli: Well, we have not already, so we don’t see already this movement. We have a constant rate of migration from the regulated market to the liberalized that as for now it is in line with what we experienced in the past. So we can’t clearly now exclude that an acceleration will happen in the last in – 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 that then the free tariffs, say both in Italy in Spain. And it may be so a valid reason to move – to have to experience the first and forced to move from the regulated to the liberalized markets.

Monica Girardi: Okay. Last one on customers. The customer in the free market have increased by 1.2 million versus previous year.

Can you elaborate on the dynamics of the margins? Have you seen any change in the churn rate?
Alberto

De Paoli: Well, on margins, I would say that – so we saw sort of stability margin this year, so we don’t see any change in margin. So increase in the overall in the unitary margin. So they increased the overall margins, may related to the increase in volumes in this period. So customers have increased in Italy, in Romania, volumes have increased in almost all the countries, margins are stable. These are the main reason of the margin increase.

Churn 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 in increase. Today in Italy the churn rate is by far the lowest in Europe and the lowest also among the markets average in Europe.

Monica Girardi: Okay.

We’ll look into a – quite a long section around the financial, 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?
Alberto

De Paoli: We expect to close around €12.5 billion, and there is – so a little bit higher than what we targeted for this year. That was around €12 billion. The devaluation generated a savings – nominal savings of around €700 million that has been reinvested in the growth of our renewable asset base, mainly in the North America.

So we increased €400 million, the target we had and we reinvested the whole effect coming from the FX impact.

Monica Girardi: Okay. There is a question which goes into the differences between nine months, 2020 and 2021. Can you elaborate on the non-occurring both on the EBITDA and net income, which were the component last year and this year?
Alberto

De Paoli: Okay. So as I said in the presentation.

So we will summarize once again. So at EBITDA level last year, we booked around the €640 million positive associated with the provision revaluation in Spain related to the energy consumption for €356 million and for €273 million there is Resolution no. 50 in Italy. This is for 2020. In 2021, we booked around €200 million from the positive curve ruling associated with the CO2 regularization.

That works with roughly €118 million and the hydrocarbon in Spain for roughly €40 million. At net income level, the items remain the same, but you have to add at the net income level, the financial impact is clearly visible. At net income level, as said in the presentation we had added to impact related to the liability program on one side and the one-off impact on the fair tax related to the fact that we had an increase in the corporate income tax in Argentina and in Columbia.

Monica Girardi: Okay. EBITDA performance versus previous year flattened compared with the six months 2021.

Can you elaborate on this trend? No sorry, that’s – sorry, sorry, sorry. Just it’s already answered, because you answered with all the non-recurring, so I think we can jump – I can jump this one. Sorry, my mistake. I was downloading 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?
Alberto

De Paoli: Okay.

So we confirm our target. This is a confirmation on the back of the continual predicting deployment of the Group. The Group coupled with the contribution of the stewardship business model that is expected for the fourth quarter. We continue to see ordinary EBITDA ranging between the €18.7 billion and €19.3 billion and the net income between €5.4 billion and €5.6 billion.

Monica Girardi: Okay.

There is another question that is about the underlying components of the net income. So we might just go back again to the same topic about – I’m reading that. Net income is down double digit 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?
Alberto

De Paoli: Well, so I think I have already answered because – so we have – out of the fact that we have the translation EBITDA into net income. And so we have said that what we call the headwinds at the EBITDA level, so translate into a €240 million of impact – negative impact on net income.

Then we have the other two effects I said. So the first is deferred tax asset for €150 million and the impact of the liability program that is around €300 million impact.

Monica Girardi: Okay. Now there is a question around the Royal Decree in Spain for 2021 and 2022. What is the updated expectation on the impact of the Royal Decree for next year – for this year and next year?
Alberto

De Paoli: 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 so 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 in our business in this country and this has been recognized by all now the amendments of the late. This preserves as to be impacted by the so-called the gas clawback. 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 this year two clawback, their behavior to have direct contracts fixed will preserve the American slow act. But so we are waiting to the old clarity and visibility to all the items of this low. And on the other side, so the decree asks for a better communication and a 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 the under the low in discussion.

Monica Girardi: Here we go with another accounting one.

Closing of Open Fiber deal, is there any update on timing? What is missed there?
Alberto

De Paoli: 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 digitalization, they call them power. And we know that the Antitrust – European Antitrust that is in the final end to define – the final judgment. And so we wait and we think that the meet of this small we may have also the final – the seizure of the European Antitrust and this is the last step before the closing of different section.

Monica Girardi: Okay.

Net debt is up by more than €3 billion versus the semester, was this level expected? What is the projected level of net debt for the full year?
Alberto

De Paoli: Well, this year, so the main items that have affected the debt is, what we call, 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 is explained the most of devaluation. 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 to 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 that will decide in the last to prolong or not, or to make some intervention to soften the situation – the financial situation of utilities related to all participants.

If not, we think that we’ll 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.

Monica Girardi: Okay. I think you partially answered Alberto, but just to make sure that the message is clear, I’m not reading also kind of a safety 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?
Alberto

De Paoli: Well, yes, I think I have already answered. So the overall impact of FFO related to these measures in Italy and Spain is around €2.5 billion this quarter. And because Brazil is almost €500 million, and it completes the €3 billion impact we have. Well, as I said, it depends on the last quarter. So this effect will be reverted at the time in which the government will decide that the support 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 over €3 billion. If it will happen this year or the next, I don’t know, sort of looking at a situation is more possible that it is going to happen next year versus this one. So we will see in the quarter, what is going to happen?

Monica Girardi: Okay. There was a question coming in on the recurring cost of that, which I think we have answered during the presentation. So next one is on the liability management.

So do you think that will be a more liability management for the year? If yes, to what extent, what is the upside versus the plan of liability management done so far?
Alberto

De Paoli: So the liability management we have completed, so the program for 2021 with the last tranche that we did in October. So it is completed, we expect to have roughly €100 million of lower financial cost starting from 2022 onwards related to this program.

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

De Paoli: Well, the vast majority of this accounting impact, because I remember that those are accounting impact 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 FX that affects the valuation of the level of accounted debt.

Monica Girardi: Okay. I'm now moving to a set of questions that came through a little bit last minute, and that I couldn't pack better. So apologies if there are some duplication here. The first one is about Spain and analyst is asking, what are our expectations for full year 2021 EBITDA, given the recent developments on clawback, and that fixed price contracts that 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?
Alberto

De Paoli: Well, I think I have already commented.

So I also look up as an anticipated. Yes. So we can confirm the targets that we have in Spain for 2021. And as said, so for the CO2 clawback, further changes are expected. And I said, we can assume a similar treatment of liability on the CO2.

So also there also for the CO2 clawback, extension 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, that is a thing the main point that we needed to have a clarification. And so now that the BCC in the parliament so I think that in the next weeks, we will see the final outcome of this liability so this is the fixed price contracts of our behavior, but we have to see what this floor that's mean in final numbers.

Monica Girardi: Okay. The second one that you have in the least has been asked for the similar to the third one, which says update on your expectations in terms of timing and impact from the new work regulation in Italy.

Do you have any recent contacts with ARERA that you could share with us?
Alberto

De Paoli: 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 then we are expecting these to be published and we don't have at the moment further information on the new proposal. So we are expecting for this, the second document, this proposal that will allow us to better estimate the final impact on what occur – 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, where we can so easily give you an update on the second document and that together with the attitude that the regulator would show.

Monica Girardi: Okay.

Question on before that I have in my research is about is a little bit of a generic question. So an analyst is asking what's the possible impact for enhanced business outlook in the medium, long-term, from the discussion at the G20 Summit and the Glasgow conference, do you see a stronger commitment by governments operates to energy, transition and development of renewable capacity?
Alberto

De Paoli: But in general, my answer is yes. So in almost all the countries in which we work, we have a high level of commitment toward a full decarbonization, and so the net-zero targets. So we see the top 20 seats is in progress. So let's see what the final outcomes will be, but really the business so the way we have as a business to support the energy transition that is electrification of consumption, and the commoditization of production is the mantra of our business model.

And so I think that so it's not avoidable is the only way to reach the decarbonization needed. Clearly now we will have to see together with the next-generation. So we are working on how the single governments that are taking some commitment in top 26 will translate in the next month, this commitment in a specific intervention in the specific countries that will allow us to work into a large business that we are managing, electric buses, electric vehicles, electrification, renewable development and everything.

Monica Girardi: Okay. The next one is on the outlook for America's EBITDA in Q4.

I would like you to answer on 2022, honestly, the positive trend that appointed in Q2 and Q3 is expected to continue?
Alberto

De Paoli: Well, we see a strong trend coming back in the Americas and in Latin America, that is driven by the full exit into 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 faster, is pushed through the investments we made in renewable development. And with the exception of Argentina, a good regulatory framework with the regulators that they care very well development and also some headwinds slides. So what we are suffering in Brazil, so the whole things are good for a steady growth trajectory for Enel Americas.

Monica Girardi: Okay, we go back into a really high-level question. Could you please share with us your view on the current situation on 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 and normalization of the current market condition, possible timing for the normalization and opportunities for analysis, quite the big one?
Alberto

De Paoli: Well, if I take so the – if we expect the current imbalance to be structured, we think that so we are entering winter situation that is to be taking care because it's so the most – so the period in which we may have some problem. But after winter and we think that we will see normalization of the situation because the imbalance between demand and offering will soften in the after winter. In fact, we have already seen in the last days how the coal price is decreased especially for the decision taking in China regarding supply and also gas price been now reducing the 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, the measure are short-term measures and we think are the best way to intervene with a spike in prices. There is a spike related to certain condition that will be solved 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 trends nor opportunities, because having a different strategy, we don't benefit of these spikes because we don't surpass despite from the customers set, 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 for the future is that we done hedge 100% of our retail position because it's impossible to add 100% so we stay a little bit lower than this every month and this year, because also not withstanding the very, very low level of not covered energy sold. We had to buy it in the market at these incredible high prices and these reduced a little bit, our margins because of price spikes, this is the only effect that we had.

Monica Girardi: Okay. And then there's a question around the guidance for full year, what are the new EBITDA and net income guidance, actually we confirmed what we gave, but an analyst wants to know which are the one-off item, the non-recurring items that these guidance will include?
Alberto

De Paoli: Okay. So the recurring items say that of today that we don't see any other kind of additional recurring items of top of what we had in the first nine months.

So we had €200 million and so now what we see, we don't have any other for the four quarters to come.

Monica Girardi: Okay. So now that the number seven in my list is a question that takes you a little bit back to the unusual, non-recurring items but probably the market wants to have released really clear and it wants probably to repeat. So can we have a detailed list of items that are unusual non-recurring in EBITDA and below, yesterday, and there's a book, €297 million from derivatives, I assume it is that as well?
Alberto

De Paoli: I'm going to repeat what are the one-off items.

Monica Girardi: I think there are two basically pieces here.

So from one side, the analyst wants to know what are the non-recurring or temporary items that we highlight in this slide, there in our presentation and what is the €300 million booked, so two pieces?
Alberto

De Paoli: Okay. So for the first – so I'm going to repeat what I said. So for us in Enel, we had so the non-recurring items are related to the CO2 regularization, and in the hydrocarbon, this was, we said. Now in 2020 as said, we have the provisional reversal in Spain and the resolution number 50 in Italy. There are the two that are of 2020.

Now and this is what I said before. So only to repeat what are the two main items. Now when it comes to Spain, because I got some – not clear understanding this €300 million are not one-off, €300 million are part of an hedging strategy that Spain decided to have this year. There is an hedge strategy this year, this is positive on one side and negative on the other side. The overall strategy of the short position and hedging on gas and derivatives has to be seen as the same strategy, but the same strategy together is giving Spain an overall margin of roughly €50 million.

So in the overall hedging activities between short position and derivatives, so looking at different level, one, one-off and other not, is that correct? But the overall strategy is the same strategy we do every year that recover 100% of our position. In this case, we had covered with different hedging strategy, but if you combine the two 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 zero, like an hedging - normal hedging strategy, but roughly plus 50. So no one-off related to these €300 million is normal hedging strategy that we do every year, but this year, we decided to do differently. And so may seem that are different things but are the same that we do every year.

Monica Girardi: Okay.

I think we had a couple of question, two, three questions that have been already answered, and they are just repacking of the themes that we have already digging to. I'm learning to the last one, which is in my list, the number 10. What is the so-called costs for energy transition and digitalization which are defining the difference between the ordinary and the reported EBITDA for a total amount of €1.3 billion. Can you comment?
Alberto

De Paoli: Well, let's say yes. So it's along the last year, and this year, we have decided to create a fund that is called an internal Just Transition Fund that is related with the funding activities related to the decarbonization and the digitization of the company.

Through this fund, we will use that. So these funds have to create just transition for all, also for the people that will be impacted by the closure of our coal plants or so 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 two access.

Monica Girardi: 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 listen to this call. We will answer the questions that have been answered by the 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.

Alberto

De Paoli: Thank you, everybody.

Operator: This concludes the conference for today. Thank you for participating. You may now disconnect.