Good afternoon, ladies and gentlemen, and a warm welcome to the Q1 2021 Results Presentation, which will be hosted by our CEO, José Bogas; and the CFO, Luca Passa. Following the presentation, we will have the usual Q&A session open to those connected on the call and on the web.

Thank you. And now let me hand over to José Bogas.

Thank you, Mar, and good afternoon to everybody. Let's start with the main highlight of the period.

In the first quarter 2021, we had faced a complex and turbulent market context in which we have managed to achieve and EBITDA is slightly above €1,000 million in line with our full year guidance announced back in November last year. The investment in digitalization undertaken in recent years and the provision booked so far devoted to coal fleet accelerated closer and digitalization have allowed for a high degree of operational efficiency.

We have evidence of our progression in reshaping our company towards cleaner and more sustainable business approach is delivering more than 90% of our CO2 free output on mainland. While all of our bank debt was linked to sustainable metric, our active management of current assets and liabilities has allowed us to deliver a sound cash generation doubling operating cash flow when compared to the 2020 first quarter.

And finally, the 2020 shareholder remuneration proposal which is the highest since 2014 was approved at our recent AGM a final dividend of €1.3136 per share will be paid on the first business day of July, which on top of the €0.7 per share of the interim dividend already paid in January represents a 37% increase versus last year. Moving now to Slide number 3, in terms of ESG, 2021 will be a turning point for Endesa.

The acceleration of the coal fleet closer has allowed us to exceed 2023 CO2 emission free output target two years in advance. Further proof of our strong commitment to the decarbonization was the recent approval of the AGM complementing the variable senior management remuneration with a renewable deployment during the same timeframe of the current plan.

Concerning the social aspect, we firmly believe on the commitment to alleviating the net of the most vulnerable group in the sense Endesa and the Catalan Government agreed to write off energy debts for more than 35,000 vulnerable families. We think the circular economy under the European Union recovery framework we have presented 17 projects for a €3.6 billion.

For these initiatives 40,400 new jobs could be created. We have also achieved a forward - step forward in our plan to promote gender diversity with the percent of women in position of possibility of reaching over 36% of Director on the Board from the former 30% and well on track to reach the announced 40% by 2022.

I would like to point out that regarding health and safety, it should be noted that Endesa's continuing effort to protect employees and contractor in the work environment. The combined accident frequency rate on our own workers and contractor has improved, confirming the downward trend recorded for many years now.

The deployment of all of our initiatives and the integration of the ESG scope across all areas has been recognized by the most prominent ESG rating worldwide. Endesa has recently been included in the top ranking position by IFS quality score index.

I would like to comment on the evolution of the scenario over the period on Slide number 4. First quarter of 2021, clearly shows that electricity demand in Spain is still far from recovering from the effects of the pandemic, despite the cold waves spreading this winter, we have seen one of the most hesitant first quarter in recent times.

Mainland power demand has increased by 0.6%, but decreased minus 0.4% adjusted by calendar and temperature effect. Likewise, in Endesa's concession area gross demand has slightly increased by 0.4% in non-adjusted terms and 0.1% in adjusted terms.

These figures are mainly driven by the drop in industry and service segment partially offset by the increase in the residential sector activity. As far as prices are concerned, the 30% increase over the period mainly stems from the effect of lower temperature due to Filomena storm in January, which can be clearly seen in the chart as well as the rise gas references.

Let's move now to Slide number 5, where thanks to continued effort on decarbonization, mainland renewable capacity represents around 45% of the total, well on track to reach the 62% target set out in our business plan. Likewise, CO2 free resources constitute 64% of our installed capacity in the Peninsula as a consequence of the coal phase out process today's thermal generation represent gas 9% of the total mainland production mostly from CCTs a decrease of 21%.

It means it has allowed us to reach a renewable output of 4.1 Terawatt hour, 14% increase versus the first quarter 2020, 73% of this production increase is due to the combination of new wind capacity, which came on stream at the end of 2020 and higher load factors. Emission-free production boosted to 91% of the mainland total output all ready exceeding the target set for 2023.

On Page number 6, let us now focus on the main drivers supporting our ambitious growth in renewables. We continue to maintain constant effort to fit our renewal project pipeline, which is key to achieving our ambitious 2030 capacity development plan.

And our growth pipeline was boosted to 44.4 gigawatts from 41.8 announced in the full-year 2020 out of which around 15% has TSO awarded connection points, and 2.3 gigawatts under execution. Considering the latter project and the mature pipeline, solar technology weighs 70%.

All of these provide comfort to be on track to meet the 700 megawatt of renewable capacity target. In March 2021, Endesa acquired a photovoltaic portfolio of 519 megawatt from the Spanish developer Arena Power.

Total CapEx including acquisition and construction will amount to €350 million. Regarding storage project we have built up an important pipeline of six-gigawatt in batteries, out of which suitable 0.4 gigawatt are already in our mature pipeline.

When it comes to electrification on Slide number 7, total energy sold dropped by 3% quarter-on-quarter as a consequence of the COVID impact on economic activity. This last quarter has been fully affected whereas in the first quarter of 2020 it was impacted by only 15 days, but also the high competitive intensity in the market, the labor effect of 2020 being a leap year and the different Easter holiday period must be taken into account.

By segment, the most effective is B2B minus 9% hit by the economic deceleration due to the COVID impacting industrial activity. B2C sales showed an increase of 10% mostly as a consequence of the low temperatures due to the Filomena storm and still important home working mode.

Total power customer decreased by 1% or around 110,000 of which 63,000 in the pre-market due to the strong increase in competitive intensity. At the same time, we have been putting in place a number of commercial strategies for both B2C and B2B sector helping us to re-build this trend.

Our approach is based on our client knowledge and increasingly sophisticated range of products and services in retaining and attracting higher margin clients through increased value proposal. All this is possible thanks to the digitalization investment carried out by the company in the last years, the improvements of the commercial channels and the continued focus on efficiencies.

Regarding electric mobility, we continue to deliver on our deployment plan of charging points reaching a total of 7,500. This continuous effort enable's to maintain our leadership position in Spain with more than 2,000 public charging points.

Regarding our energy management in Slide number 8, the unitary integrated margin resulted in €30.3 per megawatt hour a 12% decrease that should versus the €34.3 per megawatt hour of 2020 while electricity sales in the liberalized business are down by 4% minus 0.7 terawatt hours. This margin normalization was already anticipated and in line with the business plan expectation of €29 to €30 per megawatt hour in 2021.

Moving to 31 in 2023 baked by higher stake of renewables in our mix and better market condition as COVID fades. The main factors behind this margin decrease were lower generation margin mainly due to the application of the new Catalan tax and lower OTC - references, the absence of the positive FX recorded last year around the effective management of sole position versus a flat situation in this quarter.

And the supply margin almost flat, having a better sales mix with a slightly higher unitary margin mitigating lower sales and higher ancillary service cost. Regarding power sales we have hedged for 2021, 97% of our estimated price driven output at a price of around €71 per megawatt hour.

Once we consider our total hedge mix the all in revenue that is including index energy will reach €67 per megawatt hour. For 2022 hedged volumes stand at over 60% at a price of around €74 per megawatt hour.

All-in-all price and estimated all-in revenue will be similar to 2021 once all of the estimated price driven output has been hedged. And now let me handle to Luca Passa, who will give you the financial results.

Thank you, Pepe and good afternoon, ladies and gentlemen. Let's now have a look at the financials of the period on Slide number 10.

Reported EBITDA stood at €1.19 billion decreasing 31%, on a like-for-like basis once netted from the last year personnel provision effects the EBITDA would have decreased 9%. Net ordinary income dropped by 41% year-on-year, reaching €491 million, 13% lower deducted the first quarter 2020 provision mentioned above.

Funds from operation reached €583 million doubling last year reference. Finally, net debt increased to €7.5 billion up plus 9% versus full year 2020.

Moving to the detailed analysis of the like-for-like EBITDA on Slide number 11, let me now briefly set out the main drivers. As already commented, like-for-like EBITDA stood at €1.19 billion minus 9% versus first quarter 2020.

Generation and supply EBITDA decreased by 16% to €462 million mainly affected by the market conditions impacting in the business as well as - we will explain later on. Distribution EBITDA declined 3% at €476 million, finally non-mainland generation EBITDA remained stable at €81 million.

Moving into a deeper analysis, we are now on Slide 12 on the regulated business. Like-for-like EBITDA decreased by 2% to €557 million with a lower gross margin, partially offset by a 13% reduction in the fixed cost.

Distribution margin decreased by 3% mainly due to the application of the new remuneration parameters of the second regulatory period. The non-mainland generation gross margin fell by 15% negatively affected by demand drop associated to COVID, the absence of the positive regularization from previous years recorded in 2020 and the lower remuneration in the new regulatory period partially offset by better fuel and CO2 compensation.

Fixed cost were €26 million lower once deducted the net provision release effect of last year, mainly due to the lower maintenance cost in the islands. Moving to the regulated business on Slide number 13 EBITDA reached €462 million, 16% decrease with 5% of lower gross margin and 15% increase in the fixed cost on a like-for-like basis, mainly as a consequence of the positive update of workforce provision booked last year.

The liberalized electricity margin amounts to €766 million being positively affected by the recognition to Endesa on the right to be compensated for the CO2 claw-back in 2006 for €188 million booked in 2021. In addition, as mentioned before, it has been negatively impacted by the new Catalan tax enforced since July 1, 2020, the absence of the positive results in the short position booked last year and by lower OTC references.

Supply margin remains very flat with a slightly higher unitary margin overcoming lower sales and higher ancillary services costs. Enel Green Power gross margin reached €103 million plus 26% thanks to the new capacity in place and 36% increase in the production.

Gas gross margin fell €64 million in first quarter 2021 to €11 million mainly affected by the negative mark-to-market delta of €61 million due to the steeper amount of gas prices triggering this opposite non-cash effect. We expect this impact to be diluted or fully neutralized along the next quarters as the contracts are being settled.

Excluding these mark-to-market impact in most quarters, gas gross margin is aligned to guidance. Endesa X contributes with €30 million of gross margin minus €5 million versus the first quarter of 2020 mainly due to the perimeter effect.

Moving now to the next slide, more details on the evolution of fixed cost, total reported fixed cost reached €513 million, 4% increase on a like-for-like basis. Once deducted non-recurrent effects as the update of provisions for workforce restructuring plans in place, indemnities and tax and labor related risks, fixed cost would have decreased by 3% due to several efficiency plans booked in previous years that will further contribute to the full-year results.

Moving now to Slide number 15, on the general evolution from EBITDA to net ordinary income. D&A, increased by 13% explained by the higher amortization mainly in renewable and distribution, the negative delta resulting from the reversal of the full impairment book in 2020 and a slight increase of €10 million in bad debt provisioning partially linked to COVID pandemic.

Net financial results were strongly affected by the financial revenue from interest rate for late payment in relation to Endesa's right to be compensated for the 2006 CO2 claw-back. This was partially offset by the financial update of workforce dismantling provision while rates increased by 0.91% in the first quarter of 2021 rates remains almost flat.

The effective tax rate resulted in 24.4%, slightly higher than last year and aligned to the business plan expectation and this has been a consequence of lower tax deductions in the Canary Islands. On the bottom line net ordinary income decreased by 41% over the period minus 13% on a like-for-like basis.

Moving to cash flow on Slide number 16, funds from operation increased by 111% year-on-year, reaching €583 million due to the following effects, lower EBITDA after provision paid of minus €471 million out of which €356 million are explained by the net provision effect booked in the first quarter of 2020. Working capital and others improved by 71% mainly thanks to the above mentioned net provision released in the first quarter of 2020, the improvement of regulatory receivables, our lower net balance of receivables and payables accounts and lower inventories, the effect of derivatives in other noncash provision.

Income tax paid amounted to minus €2 million versus plus €74 million in the previous year, mainly due to the €73 million corporate tax refund corresponding to fiscal year 2018. Cash-based CapEx 16% lower than the previous year also led free cash flow to positive €158 million in this period, €390 million higher than in the first quarter 2020.

Let's now have a look at net debt on Slide 17, net debt amounts to €7.5 billion, €600 million higher than full-year 2020. This increase is attributable to the payment of the interim dividend against 2020 results paid in January.

The regulatory working capital remained slightly below last year figures at a dominant €48 million, power leverage remained stable with debt to EBITDA ratio at 1.9 times on a like-for-like basis once deducted the provision effect booked in the second quarter of 2020. It is worth to highlight the extraordinary low-cost of debt which is maintained at 1.7% marking historical minimum and places Endesa as the European utility with lowest cost of debt as well as the increase in the coverage of debt maturities to a very comfortable 35 months.

And now let's take a deeper look in our sustainable finance on Slide 18, during the first quarter Endesa has continued to deploy an intense activity in sustainable finance with €2.8 billion in new sustainability-linked transactions, Endesa signed credit lines for an aggregate amount of €2.1 billion with 11 leading financial institutions, meaning that all of its liquidity bank facilities are linked to an SDG criteria. We have also reached a new milestone by linking €150 million seven year bank loan to new SDG KPI of Scope 1 with greenhouse emission reduction.

Sustainable finance now accounts for almost 50% of total gross financial debt versus 45 at December 2020 right on track towards 60% goal in 2023. COVID fiscal 2020 award for the best set of loan, we confirm our leadership in sustainable finance, developing innovative structures applying to a wide range of instruments and engaging a significant portion of our financial and commercial counterparties.

And now let me hand over to Pepe for his final remarks.

Sorry, thank you, Luca. To close this presentation on the Slide 19, I would like to serve some final remarks on our performance during this first quarter, 2021 guidance is confirmed, despite the exceptional condition in this quarter that we expect to normalize during the year.

We keep advancing in our decarbonization and electrification process in an efficient way lowering costs while increasing our share of CO2 free emission production. To these effects we increased by 22% up to €23.3 billion the project presented to the recovery transformation and resilience is flat.

Strong cash generation capacity shown during this third quarter of the year, our relevant set of innovative sustainability linked finance and operation confirm our commitment and leadership in sustainable finance. In such a context the outstanding dividend yield in 2021 is the strongest evidence of sound value creation to our shareholders.

And ladies and gentlemen, this concludes our first quarter of 2021 results presentation. Thank you very much for your attention and we are ready to take some questions.

Okay, thank you Pepe, thank you, Luca. We are now open to take any question you might have.

The first question comes from Alberto Gandolfi from Goldman Sachs. Please Alberto, go ahead.

Thank you, Mar and good evening, thanks for taking my questions. I guess the first one is, I was looking at the evolution of the customer numbers and it looks like you are broadly down 100,000 maybe surrounding just - it's about 100,000 in the quarter, which would be like nearly 4% annualized.

So I was wondering if you can comment on the dynamics in this segment and if you have a counter plan to basically stop this from happening. The second question is on the financial expenses line?

Can you tell us maybe without those non-recurring elements what we should expect for a normal quarter, should have been about €40 million perhaps. So just trying to see how normalized it would be.

And last not least, when do you think you're going to start to see the benefits from higher power prices, I guess that's a question on your hedging policies and just to double check, you have more than 30 terawatt hour - about 32 of nuclear and hydro, but also some of the renewables is exposed to power prices? So would you agree that we should think about your sensitivity to power prices for next year at about 40 terawatt hour and growing.

And I know you look at it on an integrated margin basis. But just trying to understand when you can reprice the portfolio and see all the benefits?

Thank you.

Okay, thank you Alberto. I will try to answer the first one, if it’s on ideas about the last one.

And then Luca to complement what he has to say and to answer the second one about finances. First of all, with regards to the supply competition, let me say, first of all that the supply margin - - our supply margin in the first quarter of this year 2021 remain almost flat with a slightly higher unitary margin overcoming, I would say, a lower sales.

B2C sales showed an increase of 10%, but a B2B sales decreased by 9% as we have said and the higher ancillary services costs linked to very specifically to the Filomena storm and also the very reduced thermal gap in February due to the very high renewable production linked to be very high CO2 or higher CO2 and gas prices. Having said that, it is true that total power customer decreased by 1% that is 100,000 back in the free market which is an important figure for us, 60,000 customers, which is very, very important.

So all-in-all we have faced first quarter 2021 with lower demand and expected due to the COVID restriction, but in line with last year, these higher ancillary and low factor cost mainly due to Filomena, it was - minus €25 million and the strong increase in competitive intensity - strong increased that we show in the fourth quarter of 2020 and it has continued in the first quarter of 2021. These strong increase in competitive intensity, it was produce at least in my opinion by one of the incumbents, which has increased its aggressiveness, I would say, doing three things, in my opinion - two of them with sense, in my opinion and the other without any sense.

The first one is the brand commercial campaigns huge increase, the second high sales channels, remuneration okay. And the third is a price war in the sense that trying to reduce prices to the customers.

And then the rest of the competitors have started to respond to these incumbent and also following not as this - for example but following this strategy. So we are facing a situation that had a high probability to occur, that is a price war, but in my opinion, the situation a price war it's never linked to an intelligent or smart market management.

It is usually executed, in my opinion by new entrants who normally do not sit or remain in the business, but to - I would say stuck value quickly by selling the customer base when one of the main incumbents execute this strategy. It is usually due in my opinion again for specific action for shorter interest time, or I would say to a lack of a rare sort of ability to make an offer to customer that add value to both the company and the client in my opinion.

We remain being the market leader and we have, again in my opinion, a very clear commercial strategy. We are - have been most advanced utility in Spain in terms of digitalization, which will allow us for to approach our customer in a completely different personalized ways.

Therefore, we have to continue with our medium long-term strategy based on the extraordinary effort we are making in digitalization to build a future unique value proposition for our clients, personalize and adapt it to their needs. However, in the sole medium term as you have set or acts - we are launching a set of actions - short-term actions to mitigate the negative impact of our competitors starting - looking for a not meaningful deterioration of our client portfolio marginality.

In that sense, we are increasing all channels capacity and performance, looking for a greater number of positions just to compensate the losses. And also we are allocating additional resources to strengthen loyalty and retention based on our knowledge of the customer and advance all this with the continued focus on efficiencies based on the digitalization and personalization, the business should allow us to mitigate or navigate in these troubled waters, let's say that.

Being honest, I think that sooner or later, and I think that sooner than later, we will recover the very high competitive market in which we are living. But with more chance, that the ones that we have - in my opinion, we should not be nervous.

We should manage the situation. But which is not easy.

We should manage, but we should continue with our commercial strapping that will give value to our customers and will give value to us with regard to the - when we are going just to benefit from the higher power prices, for sure in the year 2022, for sure. And also, just because the volatility of these prices and not only the power, but also the commodities you should know that we have a lone position in CO2, in oil et cetera.

We will try to mitigate to compensate and really to benefit from these situation absolutely - clear in the year 2022. And now, Luca if you want to answer and complement?

Yes, Pepe I'll give just the right numbers; when it comes to customer loss is 63,000 in the regularized market and the rest the complement 110,000 in the regulated market and just probably underline it does as we look at the liberalized customers as the main objective for us to reduce this kind of customer loss. On the regulated front, I can tell you that the trend is reversing and this trend started last year, with actually less food price where the regular tariff became the most effective tariff in the market.

With obviously food price increasing this is already reverting and we will see the reversion in the coming months. So regulators are not an issue for us, but when it comes to liberalize is the strategy that Pepe pointed out.

For the second question, when it comes to a normalized cost of debt, for us it’s in the region of €40 million per quarter with a guidance in the region of €170 million for the full year. And for the - say the third and fourth question, as Pepe said - we still have about 40% of our production to be hedged in 2022.

So therefore there we will realize some of these higher prices because if you recall, we started hedging with our residential customer base and we are leaving, I would say volumes in B2B to the last and obviously B2B are more let's say linked to the evolution of food prices therefore these remaining 40% will benefit from higher prices.

Okay, thank you. Alberto, the next question comes from Harry Wyburd from Bank of America.

Hi everyone, good evening. Two questions from me, please.

So first one is on the CO2 gains I just wonder if you could remind everyone on the call, the background to those and then, I just want to check if I'm understanding correctly, so there is €188 million and EBITDA and €70 million in financial income and obviously you add that up, that's nearly 40% of pre-tax profit? So have I have I thought about that right and was this assumed in your guidance or is this different to what you're expecting.

So that's the first one. The second one to put totally different topic, and on the projects you've proposed for EU stimulus.

It's a couple of things on this. Firstly, how do you envisage returns and competition from these projects?

So what kind of IRR do you think realistic to seeing here and do you think you're going to see the same level of financial competition on these as you do in sort of generic renewables? And then also if you got all of those projects funded would that represent an upgrade to the CapEx plans that you outlined back in November?

Thank you.

Okay. On the first one so this is a - first of all, the numbers are correct, the €188 million in gross margin and about €70 million of financial revenue for accrued interest.

This is the final judgment of the rents and it's not recognizing Endesa's rights to be compensated for the reduction in the remuneration in 2006 and the amount of the internalization of CO2 emissions rights freely assigned up by the national emission rights allocation plan, the NAP which is basically has no local duty to be there. And that's what is the sentence that we received basically, a few weeks ago now, the impact at an income level is basically €194 million, which is basically deducted for the taxes and whether it was even included in guidance, obviously not, it wasn't included in guidance but obviously we now feel more comfortable to achieve obviously guidance including this regularization given that obviously the market context in the first quarter has been slightly worse than what we were expecting, especially for the slower demand recovery.

The extraordinary events such as the Filomena storm, as well as obviously high prices in the period which has effectively resulted in managing of the short position. So that's on the first question.

On the second one when he comes to basically the projects that we have put forward for the EU recovery of the Next Generation EU Funds, are they told us 222 projects, €23.3 billion in terms of total CapEx. Now, we are targeting that the same returns as per our investment i.e.

If there are obviously grants to some of these businesses that they will have basically to reach in terms of our financial target returns the same returns. So if it's renewables and bear in mind that renewables per se cannot be eligible for the next generation EU, but have to have some specific features.

So we have some projects in renewables, which are either linked to green hydrogen or either linked to basically the right transitions in some of the core facility we are shutting down. So there are projects in renewable, but they need to have some kind of, let me say, different features because obviously renewables are, let me say, competitive in the market as of today without these next-generation EU fund.

So the target returns are spread to work 200 basis points, so when it comes to this business and we also put forward in the region of three and something billion of projects in distribution and that is the same gain. We have a target IRR returns in distribution, which is a spread to 400 basis point.

Now to the second part of this question whether these are on top of our basically business plan yes, I mean we - in the business plan, it's only a very small portion of these projects. So the majority I would say 95% to 97% that would be on top, now the probability of us being assigned, let me say, 100% a very high percentage all these projects I think is low in the sense that obviously it will be a competitive process.

We understand on those that have not been made public that will be basically auctions for different basically areas for these funds, which would be obviously run by the government. So we will see going along but for us.

Let me say, even when it comes to next generation EU, potentially grant funding on our projects we need to reach the same economic returns.

Okay. Thank you, Harry.

The next question comes from Javier Suarez from Mediobanca. Please, Javier, go ahead.

Thank you. Mar, and thank you for the presentation.

Two remaining questions the first one is on the Slide number 19 when you are saying that the guidance for 2021 is confirmed, you are mentioning as well that the exceptional conditions in the first quarter should normalize through the year. So would you please help us to understand to what conditions you are referring to and can you detail how do you spend those conditions to normalize and therefore to see an improvement, I guess in the margin during the next few quarters?

That would be the first question. The second question is from the working capital and the cash flow generation during the quarter in Slide number 16.

There has been obviously a very significant improvement in working capital absorption. So the question here is that can you help us to understand if there is any managerial effort there to reduce structurally the working capital absorption or putting the question in a slightly different terms?

What is does the number evolution in the next few quarters is that first quarter and extraordinary scene or is something that we should see as a more recurring production and so it's going to working capital. And maybe a third question, a follow-up from previous question on the recovery fund so obviously, I think that it was Luca that mentioned the fact that renewable was special and not eligible?

So can you help us to understand the logic behind the over 100 projects that you have presented that are eligible for a grant financing and which is maybe those that you believe that are particularly attractive. So any granularity on example of projects that you would be willing to finance would be a very helpful?

Many thanks.

Okay. Javier.

Thank you very much for the question. I will try to answer the first one and then Luca will complement these, but I will answer the two more questions.

With regard to the guidance - well first of all, as you know, and as we have said, the first quarter of this year 2021 was a challenging quarter as is also expected to happen in my opinion, in the second quarter of this year 2021, both as fantastic for us affected by the uncertainty about the speed of the economic recovery and the extreme volatility in the commodity and electricity prices. This, in our opinion, we really forecasted these and what we were waiting for is a recovery in the second half, an important recovery in the second half of the year.

I should say that in demand et cetera we are seeing these results in this second quarter. But on top of these forecast that we have, what we have seen is a weak demand, lower than expected as we have said higher ancillary and low stable costs due to the restriction of the COVID linked to the Filomena and as I have said the very low thermal gap in February linked also with the CO2 and gas prices.

We have been not able just to manage the sole position that we have a lot of benefits in the year 2020 due to the high forward and low spot prices that we have in the year 2020 and also we have had a negative mark-to-market in gas in the 2020, in the first quarter of 2020 and positive in the third quarter of 2020, negative in 2021. So despite of all of these I think that we got a very good results, let's say €1 billion.

€1 billion if you compare with the first quarter of other years, 2019, 2018, 2017 and 2016 high-yield on these, lower than the previous year. Yes, because it was strong and we have on top of these short position value that we have many older good results in the market, et cetera.

So we remain confident to reach our guidance by the year end and believe me, this is not a whim but is based on our view about the integrated margin and in the year as forecasted also. The growth gas margin that will be - will meet our guidance supported by the positive.

Also by the positive results from the reopened processes that were scheduled this year, we think that there will be no surprise in the regulated business and finally the efficiencies will arise from the plants in the last few years. All in all, we feel, as I have said first of all absolutely true that we are going to reach our commitment with the market.

I don't know, Luca.

Yes and maybe just complementing on these basically, we are expecting, obviously a liberalized margin in the region of €2.3 billion for the end of the year which is line to guidance and that is based on normalization now obviously with an unitary margin - unitary revenue margin in the region of €29 to €30 per megawatt hour. Obviously, we are increasing sales that are more concentrated in the second part of the year as COVID impact obviously should be lower.

And basically no additional negatives from ancillary services, which affected us in terms of cost for an additional €25 million in this quarter, obviously considering a organization of this market for less volatility. In gas obviously we expect as well to meet guidance, there are also on the back of, let me say, the positive results coming from the reopening process, so that we are basically working on this year.

And the fact that obviously the flexibility of our contracts will allow us to tribute to continue obtaining additional value in ration of shipments in other markets. We have already few cargos already this year.

So this is, I would say, working well and when it comes to the regulated part of the distribution. And also high EBITDA also are I would say, in line to reach the targets to €2 billion and €200 million respectively concerning distribution.

Basically we had a result in the first quarter with slightly below expectation due to do delays in revenue for smart meters, rent as well as connection fees for €13 million one-three and this should be obviously expected to be the goal of along the year. And then finally on efficiencies, obviously, we are expecting to reach the guidance of €1.9 million of target that because all the revision that took last year should impact in the region of just slightly more than €60 million in terms of efficiency this year.

So to give us some numbers on the guidance, on the second question is regarding working capital, I would say that this was an exceptionally good quarter when it comes to working capital and cash flow generation in general, we are expecting working capital to be basically neutral along the year not adding a negative or positive impact, but let me tell you that managing working capital in, let's say, a COVID environment is probably the most difficult things as CFO as to manage. So we are, let me say working on the assumption, but to your questions first quarter has been exceptionally good in terms of managing our working capital.

So you shouldn't expect that the same performance of for the rest of the year. And then when it comes to I would say some details for our projects that we submitted to recovery fund, as I said that €23.3 billion in total in terms of CapEx 122 projects geographically.

I mean obviously the majority on mainland about €20 billion then we have in the region of€3 billion on the Islands and something also in Portugal. When it comes to the type of projects, we have about €3.7 billion is Margarita which €2.5 billion in commission and €1.2 billion resilience and again, none of what I'm saying was included in the business plan, we have about €800 million in sustainable mobility, about €2.2 billion in building refurbishment and efficiency.

As you know, there's been a recent approval of tax incentives also in Spain regarding basically energy efficiency for buildings. We have, and I think we discussed this in the past about €3 billion in hydrogen which includes electrolyzers as well as renewables and obviously in this case renewables are basically supported by the next generation EU funds where eligible.

And then we have about €4.6 billion in storage and flexibility, storage is eligible for the Innovation Fund and then another €8.2 billion in renewables, which again are not straight renewables but are either synchronic generation links to renewable or other type of innovations in renewable. And the majority for us projects leading to the basically refurbishment of the sites where we are shutting down our facilities.

And then we have obviously have some others for upgrading of existing plants. So those are, I would say, more or less the areas in which we are putting our projects and obviously we have let me say a good understanding of what could be eligible and could be not.

And in terms of returns, I think I commented before, so that's more or less should answer your third question.

Next question from the line comes from Enrico Bartoli from Stifel.

Hi, good evening, thanks for taking my questions. I have three as well.

I would like to go back to the guidance, and particularly, we are seeing a continuing award trend in the power prices to the evolution of CO2. I was wondering let's say how safe for the guidance is in this context - this trend award for prices in 2021 continues and if you are protected in some way through your hedging policy.

The second one is related to Slide 7, actually you highlighted this decline in electricity sold on the B2B segment? I was wondering how much this is related to the weakness of demand still due to the COVID, how much is related to the competitive environment in the commercial side that you mentioned before.

And if you can share with us your view on the evolution of your electricity sold to this segment over the next quarter and I understand that you expect some recovery in the second half of the year, but if you can provide some additional comments. And the last one is related on the net debt guidance for the full year, if I remember well you had €8 billion, if this is confirmed?

Thank you.

Okay, Enrico, I will try to give you some color to these questions. The first and the second question and Luca will complement this.

Our guidance, have confident we are - like I said, absolutely we are comfortable with these. It is true that power prices are increasing and our power position has been negatively impacted in the first quarter 2021 by these higher than expected, let's say, that prices in Iberia.

But testing compensated by the positive results of our loan position in commodities mainly CO2 and oil, in which we have a clear bullish view and well looking at the full year, we have a dynamic strategy that we will apply - will lead us to limit the impact of higher power prices. At the same time that we, take advance of the anticipated CO2 purchases that is in my opinion on all things, but Luca could complement.

And in relation with the, what about the reduction in the B2B segment it's mainly due to the COVID effects that has really hit this segment, mainly industrial on SME companies, let me say that during the whole year, that is during the lockdown and the pandemic situation, the drop was something around 10% in the industry, 10% in the services and slightly higher B2C. Now services and SMEs continues around 10% of drop compared with the same period of the last year and only the industry is recovering little by little the situation.

So, in my opinion the first thing here is, yes, the COVID effect. But Luca do complement.

Sure. When it comes to the first question, I think you touched upon, I mean obviously we still have obviously some open position when it comes to electricity position, but as Pepe said basically, this is a counterbalanced by a long position and when it comes to Brent and CO2 obviously for the production that we were expecting in the Islands and these two effects are basically mitigating themselves so even though you could expect.

Let me say, higher power prices throughout the year, we have, let me say and hedge that is working perfectly in order not to suffer any negative effect. When it comes to the third question, the guidance was €8.2 billion when it comes to net debt for this year and we confirm the guidance assuming regulatory working capital of about €600 million, so some improvement in working capital along the year.

Thank you. The next question comes from Jose Ruiz from Barclays.

Please, Jose, go ahead.

Yes. Good afternoon, and thanks for taking my questions.

Just two. The first one is, within the integrated unit margin, are you including the €188 million from the CO2 regularization?

And if you can share what is from that €30, the retail margin? And the second question is basically if you can make a comment on the proposal of the new capacity market in Spain, and if there is any impact, I was wondering if you had included it in your business plan?

Thank you very much.

So, maybe, Pepe, I'll answer the first one, you go for the second one.

Okay. Let's go.

Okay. So, when it comes to the CO2 basically, claw-back €488 million.

Yes, those are included in the integrated margin. Let me add that obviously, we have this positive effect, but we also have some negative effects in the first quarter of this year.

The sum of all these effect are for a positive €100 million. So, it's a positive EUR188 million for this year too, as we mentioned, then we have negative for ancillary service cost for the volatility we experienced in this first quarter of €25 million.

We have a negative mark-to-market in gas and electricity for about €50 million the majority in gas and some other are not a guarantee fixed cost. So, let me say that we have a positive non-recurrent of about €100 million in the first quarter.

And when it comes to the, basically retail margin and we have as mentioned during the presentation, a slightly higher than €10 margin in supply and is slightly better than first quarter last year. And for the second question, over to Pepe.

Okay Luca and Enrico. First of all, we have not consider these capacity payment in our business plan because above up to the last right in 19th of April, they wouldn’t know anything.

So, but it is true that the administrator - that the Spanish Government is launching that based on our regulation to create the capacity market. In order on the one hand to secure the deployment of renewable in line with the Spanish National Energy Plan 2021 to 2030 and on the other hand to improve their security of supply, which is very, very important there.

Let me say that if you are expecting forecasting to have more than 70% of the output in the year 2030 coming from renewables, you should really try to improve or to give some kind of comfortability to the electricity supply. And the only way to do that is the capacity remuneration of capacity.

And I'd say, not only new capacity, but also the existing one and looking for, in my opinion at least in different market signals needed to attract new investment on one hand and to maintain the system plan which are absolutely necessary to ensure that demand is met. So, we are very happy with these new regulation, we will see what happens, it will take in my opinion, around two years, just to deploy, to start with these, we will follow the discussion that we will have, I mean with the companies, with the Minister and also with Minister in Spain and with the European Union.

But it's some good news for us. The second thing is that we don't have any euro or any payment in our business plan linked to this.

The next question comes from Javier Garrido from JPMorgan. Please kindly go ahead.

Thanks, good afternoon. There is only one question left, if you could explain a little bit more in detail the evolution of the liberalized margin in electricity where you are reporting €26 million due to increase, and this includes the €188 million CO2 regularization, while the drop in sales - in regularized sales and the drop in integrated margin of €4 per megawatt hour would explain a EUR100 million drop in the gross margin?

So what is driving the delta, you have a€188 million one-off in CO2 and €100 million drop in the gross margin from liberalized sales and why it is only electricity in gross margin growing by €26 million and apologies for the convoluted question? Thank you.

Hi, Javier, this is Luca. So just to give you the integrated margin evolution basically, we have a generation margin, which is down about €54 million and this is driven by the negative impact of the Catalan tax for about €30 million, we have €25 million of lower OTC deference vis-à-vis basically last year flat margin in generation for ancillary services, which is a cost in retail and an output, which is likely higher for basically the renewables for 0.3, but there is no relevant impact when it comes to the generation.

In supply, as I mentioned it's more or less flat, but we have basically €22 million plus impact from a better sales mix i.e., lower sales got about 0.7 terawatt hour, but high - slightly higher margin that is basically 0.2 and that is driven by B2C sales but basically €25 million cost in ancillary services, we are a long basically customer position. We have a long customer position.

So we are a net payer when it comes to ancillary especially when you have this volatility because we cannot recover basically this cost in generation. And obviously the short position, which was positive for €44 million last year and is basically zero this year.

So these are basically the effect of driving basically down the buck in electricity then when it comes to gas, obviously the mark to market is one of these affecting this quarter but you asked for all this a little bit.

The next set of questions come from Jorge Guimaraes from Janney Capital.

Hi, good afternoon. Many thanks for taking my questions.

And I just have two. The first is if you can quantify the negative market in gas where it's where it is coming from.

And the second one related to your very detailed explanation about the strategic behavior in the supply market in Spain, from the awards, I understand of the incumbent has started a price war. But the other you and the other two or three so far did not respond to it?

What will - my question is what do you believe will happen to the other incumbents, which from your words not enter into these wars so far. Do you expect them to remain still or do you see any risk of them entering into this struggle - this fight?

Thank you very much.

Well, let me try to answer the second question and then Luca again will complement and also will answer the first one. In my opinion, there must be rationality and economic sustainability supporting any business that is the first thing.

When some agents only intends to speculate in the short term, instead of seeking create value in the medium and long-term a bubble is created. That is what happened in the renewables and that is what happened in the supply - in the supply.

But just because this has no - is not sustainable in the future, what I think and what I would like to think is that it is more a tactical situation that will be shortly. The thing is that you should maintain yourself account, doing things, of course doing things because what we are looking for is it has to create value for our customers and also for our self.

I think I've said being incumbents, which means for me big players that want to stay in the business for long. So being incumbents or being new entrants but trying to be for a long time in the market in the business, you should be take care about the market.

That doesn't mean you are not going to compete of course, we're going to compete, you should compete in technology, you should complete trying to reduce cost, you should compete debt, but never you should try to go below your costs. Let me say many suppliers, I would say new entrants or some while at least some of them if you go to their P&L, it's amazing negative.

So what are they looking for, if they have negative P&L. They are looking for increase the customer base and sell the customer base, but that doesn't fit the world with an incumbent.

I mean a big company that wants to stay in the business for a long time. So that is why I have said, first of all, I don't think it is going to last a long time.

Second I would describe the, on the one hand continuing with our efforts in digitalization looking for the platformization, looking forward a unique value proposal to our customer, looking for creating value - creating value and on the other hand of course trying to mitigate these let's say, I would like to short term situation - short-term situation. And that is what I have said navigate in troubled waters.

I think that sooner or later, I think sooner, we will see how things go to what it should be. That means very high competition, but not a silly competition that is my opinion.

And Luca?

Yes, when it comes to the first question on the mark-to-market of gas. I mean obviously these are the position that we have on gas.

So non-cash, the Delta is €61 million. It's negative for €32 million this quarter, and it was positive for about €29 million in the first quarter 2020.

Now as I said, this is basically, we don't have any cash effect and we expect that basically the impact to be diluted on fully realized basis along the next quarters as contracts are being settled. So it just let me say the current mark-to-market on the position as of today.

And my guess, this is the first question. We don't have any other questions.

Thank you. And the next question comes from Lillian Starke from Morgan Stanley.

Please Lillian, go ahead.

Hi, just one question from me. And you had in the past mentioned that you're focusing more on the SME segment and given the troubles they've had so far from what you mentioned that they're still seeing declines in demand.

I was just wondering, is there any concern on your behalf around counterparty risk and that some of these businesses might just be under pressure for a bit longer, and given how they might have been affected by the COVID situation?

Pepe, you want me to answer this.

Yes okay.

When comes to let me say, managing of our debt than what we're seeing on bad debt evolution, let me say that what we have seen still some tale of COVID in the first two months of this year already in March. In April, this has been recovering quite well, especially in all the B2B sector including SMEs.

Now when we see more - let me say, potential increase in terms of provisioning throughout the year, it is on B2C, B2C is the one that is most affected as of now. So it depends a lot on, let me say the recovery, the GDP recovery of the country and the impact of this on basically main street in order for us to basically not to basically increase provisioning in B2C this year.

But when it comes to your question in particular, we have seen already a rebound - positive rebound in terms of evolution of basically counterparty in the last two months, so in the month of March and in the month of April.

Okay. Alberto Gandolfi is back with some additional questions.

Please, Alberto.

Mar, thank you. Just one actually and just because the magnitude to speak, so apologies for following up, abusing your kindness.

But look, as you said €100 million is the net positive effect in the quarter, am I right in thinking that you're just talking about above EBITDA and then we also have the €80 million financial expenses or is it €100 million all-in at the, let's say, just the entire level at the bottom line. Thank you.

So, the financial expenses affect that it comes obviously with the rest of the sentence but to be honest, we are not planning on the bottom line. So no recurrence in the quarter, a positive €100 million and the majority of it especially the CO2 was not obviously, let me say accounted or budgeted for, but we had obviously tougher situation in the first quarter we had to faced.

So that's why we have basically confirming guidance expecting a normalization of the situation along the year and counting on these basically €100 million positive that we recorded in the first part of the year.

Okay, thank you. This was the last question from the call.

And we have received a couple of questions from the web. Okay.

The first one comes from [indiscernible] from Bloomberg. And I guess that is for you, Luca.

How do you expect your cost of debt to evolve in the coming years if the increase in bond yields and inflation continues?

So to-date, we have 60% of that which is interest rate hedge, the average life of this hedge is similar to the one of the debt oil which 4.5 years in terms of durations. So, given the absolute level of rates in the Eurozone and the significant percentage of re-stage that we will not expect - we do not expect basically any material impact or we expect a very moderate impact.

Now the current estimation for the full year is still 1.7 in terms of cost to debt. And obviously if really interest rates may tends to go higher like have seen in the U.S.

recently obviously we can also basically start to fixing more, because we have been, probably one of the utilities with the more valuable stance in the past that obviously has allowed us to reach this basically low cost of debt, but obviously as soon as we see a change in the environment that we could actually fix more and maintaining or limiting any impact and the overall cost of debt.

Okay. And the last question comes from [Sanchez] from UBS.

And he is asking about our view of the potential action for the excess capacity from the coal plants that will be shutdown. If we have some advantages by presenting a transition period or we will go through the competitive process that government is planning to land?

I will say something and then Luca please compliment the answer. We will go to the competitive process that we will see in the future.

Having said that, yes, in the so-called gas completion we have many projects I think the special coal power plant closure that will create really employment and will therefore be the place in which we had these coal powered plants. So having said that, well, mainly we will do these tenders let's say that competitive processes and perhaps some them we will have an extra premium, let's say that yes, because we are trying to re-borrow the situation due to the closure of this coal powered plants.

Yes, and if I may complement Pepe, basically the regulations for basically running auction for these process are still being approved. According to recent statements by the Ministry of Ecological Transition, the first capacity auction should be for the plant of Teruel which is in Andorra and the work criteria would be obviously socioeconomic and environmental, height of the economic criteria and obviously we are working to obtain obviously the necessary capacity for the renewable developments we are planning in this area.

Okay many thanks. There are no questions and just to remind you that IR team will be available in case you need help or you have any other questions.

Thank you very much for your attention.