Endesa (NYSE:ELE)
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From Jul 2019 to Jul 2024
ENDESA (NYSE:ELE):
EBITDA GROWTH REFLECTS POSITIVE PERFORMANCE OF THE COMPANY’S
BUSINESSES
EBITDA stood at Euro 3,831 million in the first half, an increase of
8.4% on a like-for-like basis and 1.8% higher than the figure reported
in 1H 2006.
STRONG CASH FLOW INCREASE
Cash Flow from operating activities rose to Euro 2,574 million, an
increase of 22.1% from 1H2006 results on a like-for-like basis.
SOLID PERFORMANCE OF ALL BUSINESS LINES AGAINST A DEMANDING BACKDROP
Net income from business in Spain and Portugal stood at Euro 873
million, an increase of 19.8% on a like-for-like basis. Income from
distribution and supply activities and natural gas business offset the
more moderate demand for electricity and lower pool prices.
In Europe, net income jumped 1.5% to Euro 206 million on a like-for-like
basis. A more diversified sales mix and improved power management offset
demand drop.
Latin American businesses improved significantly with EBITDA and EBIT
increasing 6.8% and 5.2% respectively. However, net income dropped on a
like-for-like basis a 6.9% compared to the same period last year,
situating it at Euro 176 million, as a result of negative exchange
differences and performance of non-consolidated companies.
RESULTS AT THE COMPANY'S THREE BUSINESSES IN LINE WITH FORECASTS
PROVIDED TO THE MARKET.
KEY FACTS AND FIGURES FOR 1H07
POSITIVE PERFORMANCE OF NET INCOME ON A LIKE-FOR-LIKE BASIS
ENDESA reported 1H07 net income of Euro 1,255 million. This is almost
entirely recurrent as net income from asset disposals accounted for
only Euro 7 million after taxes and minorities.
Conversely, net income in 1H06 was affected by a number of sizeable,
one-off items, totalling Euro 641 million:
-- Recognition of stranded costs for non-mainland generation
for 2001-2005, which amounted to Euro 227 million, and for
interest, which amounted to Euro 31 million, with a
combined impact of Euro 197 million on net income.
-- Fiscal impact relating to Endesa Italia's revaluation of
the tax bases of its assets to their book values, as
permitted by current legislation in Italy. This effect,
which totalled Euro 148 million, had an impact of Euro 118
million on net income after minority interests.
-- Fiscal impact of the Elesur and Chilectra merger, which was
Euro 170 million, with an impact on net income after
minority interests of Euro 101 million.
-- Income deriving from asset disposals, amounting to Euro 260
million (Euro 225 million after taxes and minority
interests).
Like-for-like growth in net income in 1H07 was 11.9% vs. 1H06.
POSITIVE RESULTS ACROSS ALL BUSINESSES AGAINST A DEMANDING BACKDROP
Net income in Spain and Portugal rose 19.8% on a like-for-like basis,
to Euro 873 million, compared to 1h06 despite a moderate demand
increase and “pool”
price drop.
In Europe, even with a considerable decrease in demand, net income
rose 1.5% on a like-for-like basis from 1H06, to Euro 206 million.
In Latin America, net income fell 6.9% on a like-for-like basis from
the first half of 2006, to Euro 176 million euros. This decline was
largely due to factors outside the scope of the group’s
management, such as lower income from exchange differences, and
unfavourable results from non-consolidated companies.
GROWTH IN THE MAIN INCOME STATEMENT ITEMS ON A LIKE-FOR-LIKE BASIS
Gross margin was Euro 5,532 million in the first half of 2007, 9.1%
higher than the same period in 2006, on a like-for-like basis.
EBITDA was Euro 3,831 million, an increase of 8.4% on a like-for-like
basis.
EBIT was Euro 2,777 million, up 5% on a like-for-like basis.
Cash flow from operations totalled Euro 2,574 million, 22.1% higher
than in 1H06 on a like-for-like basis.
LEVERAGE RATIO IN LINE WITH STRATEGIC PLAN TARGET
Leverage stood at 124% as of 30 June 2007, compared with 124.5% on 31
December, 2006, in line with targets set out in the Company's
Strategic Plan, which calls for leverage of no higher than 140%.
BUSINESS IN SPAIN AND PORTUGAL
Positive performance of main income statement items
Net income from business in Spain and Portugal was Euro 873 million,
accounting for 69.6% of ENDESA's total income.
On a like-for-like basis, excluding impact of the recognition of
stranded costs for non-mainland generation for 2001-2005, which were
booked in 1Q06, net income at this business rose 19.8%.
EBITDA rose 11% to Euro 2,001 million from a year earlier, and EBIT
climbed 7.5% to Euro 1,372 million, both measured on a like-for-like
basis.
Competitive position reinforced by mainland generation mix
In the first half of the year, the Company met 82.5% of its Spanish
demand using its own power stations. This balance between generation
and demand gives ENDESA a clear competitive advantage over its
competitors, thanks to its lower exposure to risks arising from
changes in rainfall patterns and fluctuations in wholesale prices.
Nuclear and hydro powered energy comprised 43.6% of ENDESA's mainland
generation mix, compared with 38.1% for the rest of the sector.
The load factor at ENDESA's thermal plants in Spain stood at 69.7% in
1H07, compared with 49.3% for the rest of the sector.
Specifically, ENDESA’s mainland coal-fired
plants achieved a 78.7% load factor in the first half of 2007, making
a significant contribution to covering demand in the Spanish
electricity system.
ENDESA’s mainland fuel cost for ordinary
regime generation stood at Euro 15.9/MWh, i.e. 25% above the average
estimated for the rest of the electricity sector.
ENDESA achieved this strong operating performance while at the same
time maintaining its leading position in the Spanish electricity
sector. ENDESA still has the largest share of the market both in
electricity generated under the ordinary regime (36.1% in 1H07), in
the deregulated market (55.2%) and in terms of total electricity sales
to final customers (43.2%).
Optimisation of supply business
In 1H07 ENDESA sold 51.7% of its output in the deregulated market,
where prices rose 19.8%, while the rest of the sector sold 17.4% of
its output.
Therefore, compared to its peers, the Company's supply strategy gives
it greater coverage against fluctuations in wholesale market prices.
The average selling price to final customers stood at 52.6€/MWh,
an increase of 19.8% vs. 1H06.
ENDESA: top investor in electricity facilities in the Spanish sector
ENDESA invested Euro 1,140 million in Spain and Portugal in 1H07, of
which Euro 1,017 million, or 89.2%, was capex. This underscores the
Group’s position as the largest investor in
electricity facilities among Spanish power companies.
Euro 519 million of this capex was spent on upgrading distribution
assets to enhance the quality and security of supply.
We also highlight the investment made in renewable energy plants. This
amounted to Euro 167 million in 1H07, i.e., Euro 118 million more than
the amount invested in the same period last year.
Sharp growth in generation from cogeneration and renewable energies:
24.6%
Renewable and CHP companies fully consolidated by ENDESA generated
1,540 GWh in the first half, an increase of 24.6% from the same period
in 2006.
Gross margin at these companies was Euro 121 million, an increase of
0.8% from 1H06.
Distribution activity makes a larger contribution to results
EBIT in distribution business was Euro 517 million or 52.1% higher
than the same period last year.
This performance was mainly the result of the increase in remuneration
stipulated in the Royal Decree governing tariffs in 2007 and
operational improvements achieved in this activity, above all through
initiatives to reduce losses and lower fixed costs.
Better earnings from this activity have come alongside a 33.7%
improvement in ENDESA’s quality of supply in
the last 12 months, which is higher than the sector average and beats
the performance seen by the Group's main peers.
Fuel consumption and CO2 costs from mainland
generation fall 2% and 80.9% respectively
Fuel consumption at ENDESA’s business in
Spain and Portugal stood at Euro 1,040 million 1H07, a decrease of 2%
compared to the same period in 2006.
CO2 emissions from mainland output dropped
0.6% while CO2 costs fell 80.9%, from Euro
68 million in 1H06 to Euro 13 million in 1H07.
ENDESA: A major player in the natural gas market
ENDESA sold a total of 16,538 GWh in the Spanish natural gas market in
the first half of 2006, 25.2% more than in the same period a year
earlier.
The total regulated and deregulated gas supply business added Euro 116
million to the gross margin in this period, a 73.1% increase on 1H06.
The Company’s share of the deregulated
market was 13.3%.
BUSINESS IN EUROPE
Significant contribution to total net income from business in Europe
The Group's business in Europe reported net income of Euro 206 million
in 1H07, contributing 16.4% to total net income.
Measured on a like-for-like basis, i.e., stripping out the tax effect
relating to Endesa Italia’s revaluation of
the tax bases of its assets carried out in 1H06, net income at this
business would have been 1.5% higher than in the same period last year.
EBITDA was Euro 607 million, accounting for 15.8% of total Group
EBITDA and an increase of 3.4% compared to 1H06.
Key operating data
ENDESA’s output in Italy rose to 12,170 GWh
in 1H07 with total sales of 16,314 GWh.
Endesa Hellas: A new operator on the Greek market
On 27 June, ENDESA presented Endesa Hellas, a new operator on the
Greek market with potential to expand into other markets in southeast
Europe. The company is the result of a strategic alliance signed by
ENDESA with Greek metallurgy and engineering company Mytilineos
Holding, S.A. in which it holds a 50.01% stake.
The new company will become the largest independent energy operator in
Greece and have the largest order book of projects under construction
and in development in the country, as well as a generation mix
balanced between thermal and renewable capacity.
Mytilineos will contribute to this joint venture all its thermal and
renewable energy assets in addition to the licenses it currently holds
while ENDESA will contribute Euro 485 million, plus a further amount
of up to Euro 115 million, payable on the basis of the success of some
of the wind farm projects currently in the process of obtaining
authorisation.
Italy: Significant progress on new facilities
Within the framework of its strategy for growth in renewable energies,
Endesa Italia acquired, in the beginning of the year, Piano di Corda
and Serra Pelata wind farms, with 112 MW of total capacity, completing
an agreement with Gamesa signed for the acquisition of wind assets in
Italy. Both will come on stream in 2008.
During 1H07 Montecute (42 MW) and Trapani (32 MW) wind farms went on
stream, and July saw the start up of the Poggi Alti plant, with
installed capacity of 20 MW.
At the same time, construction continued as scheduled on the two 400
MW CCGTs at the Scandale plant, in which ENDESA Europa owns 50%, as
did preliminary work on the Livorno offshore regasification terminal.
France: Growth in Endesa France’s main income
statement items
In the first half of 2007, Endesa France, the new commercial name of
French generator Snet, contributed Euro 108 million to Group EBITDA
and Euro 58 million to EBIT, with growth of 5.9% and 16%, respectively.
Fixed costs fell 6.9% as a result of progress made on the group’s
Efficiency Plan.
Significant new capacity at Endesa France
On 12 July, Endesa France obtained the construction permit for a
combined cycle plant in the area of Lucy which will have capacity of
400 MW. With this authorisation, Endesa France now has the required
permits to construct three combined cycle plants with a total
installed capacity of 1,600 MW.
Additionally, in 1H07 the Lehaucourt (10 MW) wind farm came on-stream
and construction work started on Les Vents de Cernon (17.5 MW). In
July order for the construction of the Muzillac wind farm (10 MW) was
given.
Dividends paid by Endesa Italia and Snet
In 1H07 Endesa Italia paid shareholders a dividend of Euro 216
million, of which Euro 173 million corresponded to Endesa Europa.
In the same period, Snet paid shareholders a dividend of Euro 33
million, of which Euro 21 million corresponded to Endesa Europa.
BUSINESS IN LATIN AMERICA
Growth in total EBITDA (6.8%) and EBIT (5.2%) confirm progress of this
business
Net income at ENDESA’s Latin American
business totalled Euro 176 million in 1H07, 6.9% lower than the same
period a year earlier on a like-for-like basis, after discounting the
one-off tax impact arising from the merger of Elesur and Chilectra and
asset disposals.
This figure accounted for 14% of ENDESA’s
total net income.
Net income fall in this business was due to the Euro 2 million of
negative exchange differences reported in 1H07, compared to positive
differences of Euro 19 million in 1H06 and to non consolidated
companies reporting losses of Euro 3 million, compared to net income
of Euro 8 million reported in the 1H06.
However, operating results were positive, as reflected by the
performance of EBITDA and EBIT. EBITDA in this business area stood at
Euro 1,223 million, an increase of 6.8% compared to the same period in
2006 and EBIT was Euro 956 million, a rise of 5.2%. Measured in local
currency, EBITDA rose 10.8% and EBIT 9.1%.
We note that these improvements in the main income statement items
were achieved against a demanding backdrop highlighted by lower
rainfall and problems affecting supply of natural gas.
Growth in sales and significant margin improvements
Total sales reported by ENDESA's Latin American companies rose 6.6% in
1H07 to 30,440 GWh, driven by organic growth in their markets. Demand
in all businesses grew by over 4.6% in the same period.
The generation margin stood at USD28.3/MWh, an increase of 8.8%
compared to 1H06, and the distribution margin stood at USD41.2/MWh, an
increase of 13.8%.
Energy distribution losses were 11.3% in 1H07, an improvement of 0.1
percentage points from the same period in 2006.
Regulatory update: Edesur’s tariff increase
ratification
In the first quarter of 2007, the first distribution tariff increase
to be approved in Argentina since the 2001 economic crisis took
effect, after the corresponding resolution was published by
electricity sector regulator “ENRE”.
This increase, which is to be applied retroactively to November 2005,
contributed to an increase of 62.7% in Edesur's EBITDA, bringing it to
Euro 83 million in the first half, based on IFRS accounting criteria.
A resolution by electricity sector regulator “ENRE”
published on 18 July granted an extension of Edesur’s
first period of the concession agreement until 2013. Thus reflecting
the trust of local authorities in Endesa’s
capabilities.
Cash returns in line with Strategic Plan targets
Cash returns from ENDESA’s Latin American
business in the first six months of the year totalled Euro 343 million.
This, coupled with the USD561 million paid in 2005 and 2006, means
that 56.5% of the target set out in the Strategic Plan to 2009 has now
been achieved (USD 1,600 million).
New capacity development and investment
In Chile, construction work continued on San Isidro II CCGT, with
final installed capacity of 377 MW, of which 248 MW came on-stream on
30 April, and on Palmucho hydroelectric plant (32 MW). Also, contract
for construction of a new 345MW coal-fired power station, Bocamina II
was awarded.
Financial investments made by Latin American companies in 1H07 include
the purchase made by Endesa Chile of third-party interests in
Costanera (5.5%), Hidroinvest (25%) and Hidroeléctrica
El Chocón (2.48%).
Rating upgrade
On 3 July, rating agency Standard & Poor´s
upgraded its rating for Enersis and Endesa Chile by one notch from “BBB-“
to “BBB”, both
with a stable outlook.
These new ratings reflect the improved financial profile of both
companies and the agency’s expectations for
a favourable economic scenario in Latin America.
2006 DIVIDEND
In accordance with the resolution passed at the General Shareholders’
Meeting held on 20 June 2007, on 2 July, ENDESA paid a final dividend
of Euro 1.14 per share against 2006 results.
Following this payment, the total dividend paid to shareholders
against 2006 results, including the gross interim dividend of Euro 0.5
per share paid on 2 January, climbs to Euro 1.64 per share, which
implies a total payout of Euro 1,736 million.
CONSOLIDATED RESULTS
ENDESA reports 1H07 net income of Euro 1,255 million
ENDESA reported net income of Euro 1,255 million in 1H07. This figure is
Euro 501 million less than the figure reported in 1H06. However, to
effect a comparison on a like-for-like basis we need to bear in mind
that four significant non-recurrent items were included in 1H06:
Recognition of stranded costs for non-mainland generation for
2001-2005, which amounted to Euro 227 million, and for interest, which
amounted to Euro 31 million, with a combined impact of Euro 197
million on net income.
The tax effect relating to Endesa Italia’s
revaluation of the tax bases of its assets to their book values, as
permitted by current legislation in Italy. The amount of this tax
effect was Euro 148 million and its impact on net income after
minority interests stood at Euro 118 million.
Fiscal impact of the Elesur and Chilectra merger, which was Euro 170
million, with an impact on net income after minority interests of Euro
101 million.
Income generated from asset disposals, which amounted to Euro 260
million, with an impact of Euro 225 million on net income after taxes
and minority interests.
In contrast, 1H07 net income is practically entirely recurrent,
including only Euro 7 million, after taxes and minority interests,
relating to extraordinaries or items relating to asset disposals.
After discounting the above mentioned four effects relating to 1H06
results, and net income from asset disposals carried out in 1H07, net
income in the first half of this year grew 11.9%.
References to a like-for-like comparison of earnings in this document
always refer to variations produced after deducting the four items
mentioned above from the first half of 2006 and income from asset
disposals from earnings for 1H07.
ENDESA FIRST HALF 2007 RESULTS
Euro
million
% chg.
vs. 1H06
% chg. vs. 1H06
l-f-l
% contrib.
to total net earnings
Spain and Portugal
873
(9.2)
19.8
69.6
Europe
206
(36.0)
1.5
16.4
Latin America
176
(41.7)
(6.9)
14.0
TOTAL
1,255
(28.5)
11.9
100.0
Distribution of net income between the different electricity businesses
is balanced, reinforcing the Company’s
multinational character and its appropriately diversified risk profile.
Electricity Generation: 92,403 GWh
Electricity generation stood at 92,403 GWh in 1H07, a drop of 0.9%
compared to 1H06. Increased output in Spain and Portugal (3.4%) and
Latin America (0.3%) virtually offset the decline seen in
Europe (13.3%). This drop was due to unfavourable demand for electricity
in Italy and France during the early months of the year as a result of
milder temperatures compared to 1Q06.
Electricity sales totalled 112,158 GWh, an increase of 3.5% compared to
1H06.
GENERATION AND ELECTRICITY SALES
Output
Sales
GWh
%chg. vs. 1H06
GWh
% chg. vs. 1H06
Spain and Portugal
46,385
3.4
56,232
5.7
Europe
16,182
(13.3)
25,486
(4.3)
Latin America
29,836
0.3
30,440
6.6
TOTAL
92,403
(0.9)
112,158
3.5
Output/sales balance
ENDESA met 82.4% of its total electricity sales in 1H07 from its own
output.
This output/sales balance allows the Company to significantly reduce the
risk relating to its electricity business, giving it an advantage over
its competitors which is particularly relevant in the Spanish market. In
1H07 the Company met 82.5% of its demand in Spain from its own output.
Increase in gross margin (9.1%) and EBITDA (8.4%) on a like-for-like
basis.
Revenues were Euro 10,373 million in the first half, unchanged on a
like-for-like basis from the same period in 2006. This figure reflects
the lower value for revenues registered for greenhouse gas emission
rights allocated, free of charge, as a consequence of their price
performance. Sales were Euro 10,054 million, an increase of 3.4%
compared to 1H06 on a like-for-like basis.
Variable costs fell 8.7% due to lower fuel costs, and above all, for
greenhouse gas emission rights. In both cases, the drop derived mainly
from reductions in their respective prices.
Performance of revenues and variable costs produced an increase of 9.1%
in the gross margin on a like-for-like basis, to Euro 5,532 million.
At the same time, EBITDA was Euro 3,831 million and EBIT was Euro 2,777
million, increases of 8.4% and 5%, respectively, measured on a
like-by-like basis.
Gross margin
EBITDA
EBIT
Euro
million
% chg. vs.
1H06
l-f-l
Euro
million
% chg. vs.
1H06
l-f-l
Euro
million
% chg. vs.
1H06
l-f-l
Spain and Portugal
3,039
11.5
2001
11.0
1,372
7.5
Europe
782
3.0
607
3.4
449
(2.2)
Latin America
1,711
7.8
1.223
6.8
956
5.2
TOTAL
5,532
9.1
3.831
8.4
2,777
5.0
Net financial expenses: -3.3% in like-for-like terms
ENDESA reported negative financial results of Euro 496 million for 1H07,
a 0.8% decrease over the same period in 2006 on a like-for-like basis.
Net financial expenses were Euro 494 million, Euro 14 million higher
than in 1H06 and a drop of 3.3% measured on a like-for-like basis.
Net financial expenses for the first half of 2007 were reduced by Euro
67 million as a consequence of the higher interest rate used to
calculate real value of contingencies related to workforce reduction
programmes, which were recorded as provisions - compared with the one
used for this calculation at the end of 2006. The difference is due to a
rise in interest rates in the market.
Cash flow from operating activities: growth of 22.1% on a like-for-like
basis
The Group reported cash flow from operations of Euro 2,574 million in
1H07, an increase of 13.1% compared to 1H06. Measured on a like-for-like
basis, the increase was 22.1%.
CASH FLOW
Euro million
% chg. vs. 1H06
Spain and Portugal
1,334
22.3
Europe
435
27.9
Latin America
805
18.7
TOTAL
2,574
22.1
Investments: Euro 1,790 million
ENDESA invested a total of Euro 1,790 million in the first half of 2007.
Of this figure, Euro 1,559 million was invested in capex and intangible
assets and the remaining Euro 185 million in financial investments.
INVESTMENTS
Euro million
Capex and Intangible assets
Financial
TOTAL
Spain and Portugal
1,056
84
1,140
Europe
145
33
178
Latin America
358
68
472
TOTAL
1,559
185
1,790
Financial situation
ENDESA had net debt of Euro 20,312 million at 30 June 2007, 2.4% higher
than the figure reported at year-end 2006.
BREAKDOWN OF NET DEBT BY BUSINESS LINE
Euro million
30-06-07
31-12-06
Change
% chg.
Business in Spain and Portugal
12,719
12,548
171
1.4
Business in Europe
1,719
1,674
45
2.7
-Endesa Italia
754
748
6
0.8
-Other
965
926
39
4.2
Business in Latin America
5,874
5,618
256
4.6
-Enersis Group
5,207
4,749
458
9.6
-Other
667
869
(202)
(23.2)
TOTAL
20,312
19,840
472
2.4
We would point out that ENDESA had the recognised right to collect Euro
2,883 million on 30 June 2007 in connection with two regulatory issues:
Euro 1,441 million for financing the revenue shortfall from regulated
activities and Euro 1,442 million in compensation for stranded costs in
non-mainland generation. Stripping out these recognised regulatory
items, ENDESA’s net debt at 30 June 2007 was
Euro 17,429 million.
Average cost of ENDESA’s total debt was 5.77%
in 1H07, while cost of the debt for the ENERSIS Group was an average
9.34%. Stripping out Enersis Group debt, average cost of ENDESA’s
debt was 4.51% in the period.
The average life of the ENDESA Group’s debt
at 30 June 2007 was 5.3 years.
ENDESA enjoys a high degree of protection against interest-rate risk,
since 61% of its total debt is either fixed-rate or hedged. If we
include net debt of the items receivable to be recouped as part of
electricity regulation, the percentage of debt that is either fixed rate
or hedged climbs to 71% of the total.
At 30 June 2007, ENDESA in Spain and its direct subsidiaries, excluding
Enersis Group, had liquidity of Euro 6,500 million. Of this amount, Euro
6,216 million related to undrawn sums on unconditional credit lines.
This liquidity is sufficient to cover the final dividend paid against
2006 earnings on 2 July 2007 and debt maturities for the next 23 months
for this group of companies.
STRUCTURE OF ENDESA’S NET DEBT
ENDESA
and direct subsidiaries
Enersis
group
Total
ENDESA group
Euro mill.
% of
total
Euro mill.
% of
total
Euro mill.
% of
total
Euro
15,032
100
-
-
15,032
74
Dollar
73
-
2,148
41
2,221
11
Other currencies
-
-
3,059
59
3,059
15
TOTAL
15,105
100
5,207
100
20,312
100
Fixed rate
6,467
43
3,912
75
10,379
51
Hedged
1,689
11
238
5
1,927
10
Floating
6,949
46
1,057
20
8,006
39
TOTAL
15,105
100
5,207
100
20,312
100
Avg. life (years)
5.2
5.6
5.3
Enersis Group held cash and cash equivalents totalling Euro 527 million
at 30 June 2007, as well as Euro 512 million in unconditional undrawn
credit lines relating to two syndicated loan operations. The total
covers debt maturities for the next 19 months.
As of the date of release of 1H07 earnings, ENDESA’s
long-term debt ratings are: Standard & Poor's: A, Moody’s:
A3, and Fitch: A+, all of them under review for a possible downgrade as
a result of the takeover bid launched by Enel and Acciona for 100% of
the Company.
Total equity: Euro 16,378 million
ENDESA’s total equity was Euro 16,378 million
at 30 June 2007, Euro 442 million higher than at year-end 2006.
Of this total equity, Euro 11,442 million belonged to ENDESA S.A.
shareholders, and Euro 4,936 million to minority shareholders of Group
companies.
Total equity corresponding to ENDESA S.A. shareholders increased by Euro
151 million from 31 December 2006 as a result of net income reported in
1H07 of Euro 1,255 million, of revenues and expenses recognised in
equity, with a net positive effect of Euro 251 million, and of a
decrease caused by the distribution to shareholders of a final dividend
paid against 2006 results of Euro 1,207 million in addition to a bonus
for attendance at the Extraordinary General Shareholders Meeting which
was planned for 20 March, 2007 and totalled Euro 148 million.
Financial leverage: 124%
Positive performance of the Group's total equity allowed it to offset an
increase in net debt, and position ENDESA’s
leverage at 124% on 30 June 2007, as compared to 124.5% on 31 December
2006.
If we include net debt from these regulatory items, the leverage ratio
to 1H07 would be 106.4%.
This ratio is in line with the target set out in the Strategic Plan,
which sets a limit of 140%.
Shareholder remuneration
At the General Shareholders’ Meeting held on
20 June, the Company agreed to pay a dividend of Euro 1.64 per share
gross against 2006 results. This implies a total payment of Euro 1,736
million.
On 2 January 2007 a gross interim dividend of Euro 0.50 per share was
paid, in addition to a final dividend of Euro 1.14 per share paid on 2
July, putting the total paid out at Euro 1,207 million.
In addition, ENDESA in the first quarter of 2007 distributed an
attendance bonus of Euro 0.15 per share, or additional remuneration of
Euro 148 million, for attending the Extraordinary General Shareholders’
Meeting, which was scheduled for 20 March.
In all, ENDESA distributed to its shareholders a total of Euro 4,425
million since 2005, i.e. 44.7% of the Euro 9,900 million committed for
this concept in the period 2005-2009 in accordance with the Company’s
Strategic Plan.
STRATEGIC PLAN
Recurrent income obtained by ENDESA in the first six months was in line
with targets set out in its Strategic Plan.
This Plan, announced to the markets in October 2005, has not only been
met by the Company, but exceeded, all targets laid out for performance
of its key economic variables, as a result of the excellent performance
among its businesses and a favourable macroeconomic and industry context.
This has led to successive updates of the Plan, which have extended the
scope of the targets established.
Strategic objectives
The last Plan update, approved on 24 January, envisages meeting the
following targets in 2006-2009:
Average compound annual growth of 8% in EBITDA, to Euro 8,500 million
in 2009.
Average compound growth of 5% in profits, to Euro 3,075 million in
2009, bringing ordinary profit to about Euro 3,000 million.
Payment to shareholders of a total of Euro 9,900 million in dividends
over the period 2005-2009. Of this amount, Euro 7,600 million will be
dividends paid on ordinary income, and Euro 2,300 million will stem
from capital gains from sale of non-strategic assets.
Leverage below 140%.
Results in line with targets
1H07 results are in line with meeting the following targets:
EBITDA climbed 8.4% on a like-for-like basis compared with the first
half of 2006.
A like-for-like net income increase of 11.9%
Financial leverage of 124%.
Shareholder remuneration
With regard to dividends, at the General Shareholders’
Meeting held on 20 June, payment of a dividend of Euro 1.64 per share
against 2006 results was approved, implying a total of Euro 1,736
million.
Of the proposed dividend, Euro 1.27 per share will derive from ordinary
activities, while Euro 0.37 per share will stem from the capital gains
from the sale of non-strategic assets.
As we have already mentioned, ENDESA has distributed to its shareholders
a total of Euro 4,425 million in the first two years of the 2005-2009
Strategic Plan – including an attendance
bonus of Euro 0.15 per share for the Extraordinary General Shareholders
Meeting initially scheduled for 20 March 2007 - which means that 44.7%
of the target established for the whole period has been met: or 75% of
the target for capital gains from the disposal of non-strategic assets,
and 35% of the target for dividends from ordinary activities.
RESULTS BY BUSINESS LINE
BUSINESS IN SPAIN AND PORTUGAL
Net income - Spain and Portugal: Euro 873 million
Net income from business in Spain and Portugal reached Euro 873 million
in the first half of 2007, up 19.8% on 1H06 on a like-for-like basis.
This figure represents 69.6% of ENDESA’s
total bottom line.
EBITDA was Euro 2,001 million and EBIT stood at Euro 1,372 million, an
increase of 11% and 7.5% respectively on 1H06 (on a like-for-like basis).
Highlights
In 1H07, the Spanish electricity market witnessed a 40% fall in
wholesale market prices compared to the first half of 2006 due to a
slowdown in demand, a slump in CO2 prices from
21.88€/tn to 0.12€/tn,
and growth of 38.3% and 9.6% respectively in hydro generation and
renewables/CHP, particularly wind generation.
However, this decline in prices had a limited impact on ENDESA’s
margins thanks to the Company’s focus on
supplying the deregulated market, which acts as natural protection
against the risk associated with generation activities and the fall in
variable costs, mostly CO2 costs, as we
explain above.
ENDESA sold 51.7% of its output to final customers on the deregulated
market in the first half of the year, a segment where sales prices
increased by 19.8%. In contrast, the rest of the sector sold only 17.4%
of its output on the deregulated market. This demonstrates that the
Company’s supply strategy gives a
comparatively greater coverage against fluctuations in wholesale market
prices.
We would also note that the impact of Royal Decree 3/2006 on results for
this business was lower than in the same period last year. This year,
bilateral contracts do not include the output required to cover supply
demands, which in 1H06 had a negative impact of Euro 194 million.
With regard to the deduction of remuneration according to the value of
emission rights, ENDESA is applying the same criteria in 2007 as it did
in 2006. The fall in CO2 prices means a
deduction of only Euro 9 million, compared to Euro 121 million in the
first half of 2006.
Additionally, results reported by the gas supply business have shown a
significant improvement in 1H07, contributing Euro 116 million to the
gross margin. ENDESA achieved a share of 13.3% of the deregulated gas
market at the end of 1H07.
Lastly, revenues from distribution business increased by Euro 168
million in the first half of the year. The recent regulatory changes,
improving remuneration for this activity drove this positive
performance. Also, increase in distribution revenues, coupled with a
sharp reduction in costs, drove a 37.1% year-on-year or Euro 205 million
increase in EBITDA in 1H07.
Key operating highlights
Still Spain’s leading electric utility
ENDESA maintained its leading position in the Spanish electricity market
in the first half of the year.
The Company boasts a 36.1% market share in ordinary regime electricity
generation, 42.3% in share distribution, 55.2% in sales to deregulated
customers and 43.2% in total sales to final customers.
Competitive advantages in generation relative to peers
In Spain, the Group produced a total of 46,385 GWh in 1H07. As its total
demand was 56,232 GWh, this output was sufficient to meet 82.5% of its
demand with its own output.
Nuclear and hydro powered energy accounted for 43.6% of the Company’s
mainland generation mix, compared to 38.1% for the rest of the sector.
Furthermore, the load factor at its thermal facilities was also higher
than the average of its competitors: 69.7% compared to 49.3%,
respectively.
Growth in sales (5.7%) and customer base
The total demand supplied by ENDESA, measured by its own sales, was
56,232 GWh in 1H07, an increase of 5.7% vs. 1H06.
At 30 June 2007, the number of customers supplied by the distribution
business was 11,337,963, an increase of 243,486 vs. 1H06. 1,140,149 were
supplied on the deregulated market, an increase of 6.4% compared to the
same period last year.
Excellent quality of supply
ENDESA has notably improved its quality of supply in recent years and
this trend continued during the first six months of 2007 placing it
higher than the sector average and its two main rivals.
ENDESA’s system average interruption duration
index in Spain (SAIDI or TIEPI) for 1H07 was 40 minutes, 25.9% better
than in 1H06. The 12 month period from 1 July 2006 to 30 June 2007
reflected an improvement of 33.7%.
In terms of customer services, ENDESA's retention rate for customers
switching to the deregulated market was 109.2% in 1H07 which implies
that the net balance between customers captured and customers lost is
positive. This rate is higher than its peers and reflects strong loyalty
to the Company.
Primary energy emissions auctions
During 2Q07, ENDESA and Iberdrola carried out the first primary energy
emissions auction (VPPs) in Spain as per Royal Decree 1634/2006 with a
total volume of 1.45 TWh.
Two different products were available to participants:
Firstly, 600 equivalent quarterly megawatts of base product at a
strike price of 17 €/MWh were auctioned,
which can be used 24 hours per day and seven days per week.
Secondly, 250 equivalent quarterly megawatts of peak product were
auctioned at a strike price of 52€/MWh,
which can be used from 8.00 to 12.00 from Monday to Friday, excluding
public holidays.
Progress in the Capacity Plan
During 1H07 construction of the 800MW CCGT As Pontes site in La Coruña
continued on schedule and it is slated to come on stream soon. Also,
transformation to imported coal of group 3 at the site began with work
due to conclude in October. Once completion of transforming the last
group to start in January, is concluded, this plant will cease to use
local lignite leading to a significant reduction in greenhouse gas
emissions.
During 2Q07, ENDESA began work to upgrade the steam turbines at its
coal-fired plants including the As Pontes, Compostilla, Teruel, Litoral
and los Barrios sites with work due to conclude in July 2010.
This upgrade will involve replacing all mobile and fixed parts of the
high and medium pressure turbines with new, state-of-the-art materials
which are highly efficient and will extend the turbines’
useful life by about 25 years. Total investment is estimated at over
Euro 54 million.
The project is aimed at improving each plant’s
individual consumption by 3% as well as increasing exit capacity and
availability and also reducing maintenance costs.
Finally, worth highlighting is the fact that in July Endesa Generación
was awarded a municipal permit to construct a 20.1 MW photovoltaic solar
energy plant in San Roque (Cadiz).
1 July 2007 tariff revision
On 30 June, the Spanish Cabinet passed Royal Decree Law 871/2007
revising the electricity tariff from 1 July 2007. An average increase of
1.81% over the previous tariff which had come into effect on 1 January
2007 has been established for non-domestic tariffs.
The Royal Decree recognises, ex ante, a Euro 750 million deficit in
revenues from regulated activities between 1 July and 30 September 2007.
It also establishes a definitive price as per Royal Decree Law 3/2006 of
Euro 49.23/MWh for sales to the wholesale generation market carried out
between the introduction of said regulation and 31 December 2006 which
matches purchases by a distributor belonging to the same group for sale
to the regulated market. These transactions had been settled at a
provisional tariff of Euro 42.35/MWh as established by Royal Decree Law
3/2006.
The measures intended to reduce the deficit in revenues from regulated
activities included determining the price to be applied to sales between
generation and distribution companies belonging to the same group as a
part of a bilateral contract – as mentioned
above, this price has been set at Euro 49.23/MWh –
and the discount corresponding to the incorporation of CO2
emission rights in the setting of prices for the wholesale market,
At the time of writing this report, the definitive legislation
establishing the method to be used for calculating the discount
corresponding to the incorporation of greenhouse emission gases, was
still pending execution.
Therefore, ENDESA believes that estimated revenues for 2006 included in
that year’s annual accounts, are still the
most likely to be settled. Therefore, the company has not amended these
figures as legislation is still being finalised.
Once this legislation is finalised, any difference will be recorded in
the subsequent set of accounts following the implementation of this
regulation. In any event, we do not believe that this difference, should
it arise, will affect ENDESA’s consolidated
figures.
The tariff deficit
Despite the 4.3% increase in the electricity tariff in 2007, regulated
revenues were not sufficient to fully cover system costs. This led to an
estimated deficit in revenues from regulated activities in the sector of
Euro 505 million, of which Euro 223 million corresponds to ENDESA.
As we have mentioned above, Article 2 of Royal Decree 3/2006 states that
regulated revenues should decline with the internationalisation of CO2
rights by applying the matched selling price in the wholesale
market. This decline amounts to Euro 9 million, so estimated net tariff
shortfall stands at Euro 214 million.
In accordance with Royal Decree 1634/2006, this deficit will be
recovered in 2007 by ceding the collection rights to third parties via
auction.
In 1H07 the deficit to be recovered was updated. This change, based on
information made available in the last provisional settlement made by
the National Energy Commission (CNE), has not affected the Company’s
net income.
Revenues: Euro 4,997 million
ENDESA reported revenues of Euro 4,997 million from the electricity
business in Spain and Portugal in January-June 2007, a drop of 0.9%
compared to 1H06 (like-for-like).
This decline is due to lower allocation of free CO2 emission
rights to revenues as the allocation is carried out based on market
price which was much lower in 2007 than in 2006.
Also, sales advanced 5.1% to Euro 4,832 million vs. 1H06 (like-for-like).
SPAIN AND PORTUGAL SALES
Euro million
1H07
1H06 (l-f-l)
Change (l-f-l)
% Chg
Mainland generation under Ordinary Regime
2,055
2,126
(71)
(3.3)
Sales to deregulated customers
1,147
879
268
30.5
Other sales in the OMEL
908
1,247
(339)
(27.2)
Renewable/CHP generation
129
142
(13)
(9.2)
Regulated revenues from distribution
1,036
890
146
16.4
Non-mainland generation and supply*
881
861
20
2.3
Supply to deregulated customers outside Spain
177
147
30
20.4
Gas supply
365
279
86
30.8
Regulated revenues from gas distribution
32
23
9
39.1
Other sales and services rendered
157
131
26
19.8
GRAND TOTAL
4,832
4,599
233
5.1
* For purposes of comparison, 1H06 figures do not include the Euro
227 million for compensation from over pricing of non-mainland
generation in 2001-2005 which were recorded in that half in accordance
with the Ministerial Orders passed on 30 March 2006.
Mainland generation
Demand for electricity in the Spanish mainland system as a whole in 1H07
grew by 2.6%. Renewable/CHP generation rose 9.6% while ordinary regime
generation was unchanged.
ENDESA’s mainland electricity output was
39,302 GWh, 3.4% higher than the same period last year.
Of this amount, 37,762 GWh corresponded to power generated under the
ordinary regime, a rise of 2.6% compared to 1H06, and better than this
type of generation in Spain as a whole. 1,540 GWh corresponded to
renewables/CHP generation. This marked an increase of 24.6%, which was
much higher than the rise seen in this type of generation in the system
as a whole.
The average pool price rose to Euro 39.62/MWh in 1H07, down 40% compared
to 1H06.
The increase in mainland output and the higher prices charged to
deregulated customers were not enough to offset the lower pool price
leading to a 3.3% decrease in mainland electricity generation sales
under the ordinary regime vs. 1H06. However, this decline was offset by
lower variable costs.
Lastly, we would point out that ENDESA’s coal
plants continued to play an important role in meeting Spanish
electricity demand in 1H07. Utilisation rate at these plants was 78.7%
in response to grid requirements, proving that, in spite of the CCGT and
wind farm capacity additions, coal plants are still indispensable to
meet the country’s electricity requirements.
Specifically, ENDESA's coal-fired plants covered 13.6% of mainland
demand in the first quarter of the year.
ENDESA’s renewables/CHP generation
Renewable and CHP companies fully consolidated by ENDESA generated 1,540
GWh in the first half, an increase of 24.6% from the same period in 2006.
Revenues from sales of renewable/CHP energy generated by consolidated
companies totalled Euro 129 million, 9.2% less than in the first half of
2006.
This decline was due to the cessation of renewable energy supply
activities carried out by Endesa Cogeneración
y Renovables (ECyR) during 1H06 which entailed more electricity
purchases and sales. Discounting this factor, sales figures would remain
stable as the negative impact of the lower sales price is offset by
increase in generation.
Despite this fall in revenues, the gross margin on ENDESA's
renewables/CHP generation business grew 0.8% to Euro 121 million.
Supply to deregulated customers
ENDESA had 1,140,149 customers in the deregulated market at the end of
1H07: 1,068,548 in the Spanish mainland market, 68,162 on the islands
and 3,439 in deregulated markets other than Spain.
ENDESA's sales to these customers as a whole rose to 19,832 GWh in the
first half of 2007, 5% more than in the same period last year. Of this
amount, 17,523 GWh was sold to the deregulated Spanish market, an
increase of 4.6% and 2,309 GWh to European deregulated markets, an
increase of 8.4%.
Sales to deregulated customers in Spain (excluding the tolls payable to
Endesa Distribución) totalled Euro 1,213
million, a 28.6% increase on 1H06. Of this amount, Euro 1,147 million
corresponded to the mainland deregulated market and Euro 66 million to
the non-mainland market.
Revenues from sales to deregulated European markets other than Spain
were Euro 177 million, up 20.4% compared to 1H06.
Lastly, the average selling price to final customers rose 19.8% vs. 1H07
deriving from the Company’s stringent and
selective commercial policy.
Distribution
ENDESA distributed 57,721 GWh of electricity in the Spanish market in
the first half of 2007, a 2.5% increase on the same period of 2006.
Revenues from regulated distribution activities were Euro 1,036 million,
a 16.4% increase on the figure seen in 1H06, due mainly to higher
remuneration for this activity set by the Royal Decree governing the
electricity tariff for 2007.
ENDESA supplied 36,400 GWh of electricity to its regulated customers
during 1H07, 6.2% higher than the same period in 2006.
Non-mainland generation
ENDESA’s output in non-mainland systems was
7,083 GWh in the first half of 2007, 3.4% more than in the same period
of 2006.
Like-for-like sales were 2.3% higher, at Euro 881 million. Of this
amount, Euro 815 million corresponds to regulated market sales and Euro
66 million to liberalized market sales.
Gas distribution and supply
ENDESA sold 16,538 GWh to the Spanish natural gas market in the first
six months of 2007, 25.2% higher than the figure for the same period the
year before.
Also, 15,085 GWh were sold to customers on the deregulated market, an
increase of 28.4%, and 1,452 GWh to customers on the regulated market,
in line with the figure seen in 1H06.
The 16,538 GWh sold in both regulated and deregulated markets, together
with the gas used by ENDESA’s own generation
plants, amount to a total of 24,693 GWh, implying a market share of
12.4%.
In economic terms, revenues of Euro 365 million were obtained from sales
of gas on the deregulated market, an increase of 30.8% vs. 1H06. This
increase triggered growth of 100% on the gross margin from gas supply,
putting this figure at Euro 80 million.
Revenues from regulated gas distribution totalled Euro 32 million, Euro
9 million more than the same period last year.
Other operating revenues
Other operating revenues in 1H07 in Spain and Portugal came to Euro 165
million, Euro 277 million less than in 1H06.
This item includes only Euro 3 million corresponding to the 1H07 portion
of CO2 emission rights allocated to ENDESA
within the scope of the Spanish National Allocation Plan for emissions
(NAP), which are recorded under revenues.
This figure is Euro 333 million lower than the figure recorded under
revenues in 1H06, due mainly to strong fall in the market price for
these rights. However, this drop in revenues was offset by lower expense
recorded for use of these emission rights.
Operating expenses
Breakdown of operating expenses in the Spanish and Portuguese business
in 1H07 is provided below:
OPERATING EXPENSE IN SPAIN AND PORTUGAL
Euro million
1H 07
1H 06
Difference
% Chg
Purchases and services
1,958
2,315
(357)
(15.4)
Power purchases
474
537
(63)
(11.7)
Fuel consumption
1,040
1,061
(21)
(2.0)
Power transmission expenses
263
173
90
52.0
Other supplies and services
181
544
(363)
(66.7)
Personnel expenses
561
500
61
12.2
Other operating expenses
566
499
67
13.4
Depreciation and amortisation
629
527
102
19.4
GRAND TOTAL
3,714
3,841
(127)
(3.3)
Power purchases
Power purchases during the period stood at Euro 474 million, a drop of
11.7% vs. 1H06.
This fall reflects the net impact of the decline in operations in the
wholesale generation market as a result of lower average pool price,
which was partly offset by higher gas purchases for supply to the
deregulated market. These purchases increased despite lower price of gas
as a result of the 28.4% rise in sales to these customers.
Fuel consumption
Fuel consumption totalled Euro 1,040 million in 1H07, 2% less than the
same period last year due to efficient management in the midst of higher
raw material prices.
Other supplies and services
Other supplies and services totalled Euro 181 million, some Euro 363
million less than in 1H06.
Of this amount, Euro 333 million is due to the lower value assigned to
the freely allocated emission rights which offset lower revenues of
rights as described in section “Other
operating revenues”, and Euro 56 million
correspond to lower cost incurred in 2007 emissions and not cover by the
2006 freely allocated emission rights.
In 1H07 CO2 emissions were cut by 1.5 million
tonnes.
Personnel expenses
At 30 June, 2007, ENDESA’s workforce in Spain
and Portugal stood at 12,719 employees, similar to the previous year.
Personnel expenses amounted to Euro 561 million in 1H07, an increase of
12.2% vs. the same period in 2006.
These expenses include Euro 73 million corresponding to a provision for
headcount reductions. Stripping out the impact of net provisions for
contingencies related to redundancies both in 1H06 and 1H07, personnel
expenses in the first three months of the year were 5.9% higher.
Net financial expenses: down 14.8% (like-for-like)
Financial expenses in 1H07 stood at Euro 188 million, 18.6% lower than
the figure reported in 1H06 (like-for-like).
Of this amount, Euro 190 million corresponded to net interest expenses,
14.8% less than in the same period last year, and Euro 2 million to
exchange-rate gains.
When assessing financial results, the Euro 2,883 million financial
assets corresponding to the tariff deficit and compensation for stranded
costs on non-mainland generation, both of which bear financial interest,
must be considered.
Net financial expenses in 1H07 include revenue of Euro 67 million
corresponding to a higher interest rate applied to calculate the value,
at 30 June 2007, of obligations relating to workforce reduction
programmes existing at that date compared to the rate used to make this
calculation at year end 2006. The difference is due to higher market
interest rates.
Net financial debt for Spain and Portugal business at 30 June, 2007
stood at Euro 12,719 million vs. Euro 12,548 million at year-end 2006.
Cash flow from operating activities: Euro 1,334 million
Cash flow from operating activities from Spanish and Portuguese
electricity business totalled Euro 1,334 million in 1H07, an increase of
22.3% on the same period last year.
Investments: Euro 1,140 million
In 1H07, investments in Spain and Portugal totalled Euro 1,140 million,
6.2% higher than in the same period in 2006.
89.2% of total investment was spent on capex to develop or enhance
electricity generation and distribution facilities. We would highlight
the increase in investments at renewable/CHP facilities.
TOTAL INVESTMENT IN SPAIN AND PORTUGAL
Euro million
1H07
1H 06
% Chg
Capex
1,017
974
4.4
Intangible
39
43
(9.3)
Financial
84
57
47.4
Total investments
1,140
1,074
6.2
CAPEX IN SPAIN AND PORTUGAL
Euro million
1H 2007
1H 2006
% Chg
Generation
485
374
29.7
Ordinary regime
318
325
(2.2)
Renewable/CHP
167
49
240.8
Distribution
519
584
(11.1)
Other
13
16
(18.8)
Total
1,017
974
4.4
BUSINESS IN EUROPE
Net Income in Europe: Euro 206 million
Net income from electricity business in Europe totalled Euro 206 million
in the first half of 2007, an increase of 1.5% on the same period in the
previous year (like-for-like).
Highlights
Pick-up in demand in the second quarter
During 1H07 electricity business in Europe was affected by unfavourable
demand for electricity in Italy and France largely due to warmer
temperatures in both countries during the first three months of the year.
However, demand picked up in both countries during the second quarter
with Italy recording a 1.7% increase in April-June, thereby offsetting
the decline in the previous three months. The total difference in 1H07
vs. 1H06 was 0.1%.
Meanwhile, France saw demand fall by 6% during the first six months of
the year although this figure was not as low as the 10% decline recorded
in the first quarter.
The price differential between France and Italy resulting from sharp
fall in prices in France prompted Italy to replace its own production
with imports. This saw activity decline 3% in Italy compared to the
first six months of 2006. In France meanwhile, the 3.5% drop in own
production was less than the fall in demand (-6%) as it exports more
electricity.
As a result, generation for ENDESA’s business
in Europe totalled 16,182 GWh in 1H07, 13.3% less than in 1H06. Also,
electricity sales were down 4.3% to 25,486 GWh.
Despite this, EBITDA and gross margin rose 3.4% and 3%, respectively. In
the case of Endesa Italia, it was due to lower production costs due to
improved mix, lower CO2 costs and a higher
self-supply of green certificates. While for Endesa France, the new
commercial name of the French generator Snet, sales in the forward
market at prices set in 2006 which are higher than prices for 2007 and a
6.9% decline in fixed costs due to excellent performance of the
Efficiency Improvement Plan contributed to these increases.
BREAKDOWN OF ENDESA’S OUTPUT AND SALES
IN EUROPE
Output (GWh)
Sales (GWh)
1H07
1H06
% Chg
1H07
1H06
% Chg
Italy
12,170
13,065
(6.9)
16,314
16,778
(2.8)
France
3,171
4,606
(31.2)
8,331
8,857
(5.9)
Poland*
841
1,000
(15.9)
841
1,000
(15.9)
GRAND TOTAL
16,182
18,671
(13.3)
25,486
26,635
(4.3)
(*) ENDESA is present in the generation business in Poland through
the Bialystock CHP, which is controlled by Snet.
ENDESA enters the Greek market
On 27 June ENDESA presented Endesa Hellas. This company is the result of
a strategic alliance signed in March between ENDESA and Mytilineos
Holding, S.A. resulting in the largest independent operator in the Greek
market with the potential to expand into other markets in southeast
Europe. ENDESA holds a 50.01% stake in the company while the Mytilineos
group holds 49.99%.
Mytilineos contributed all its thermal and renewable energy assets in
addition to the licences it currently holds making Endesa Hellas the
operator with the largest order book of projects under construction and
in development in the Greek market which should allow it to obtain a 10%
market share in 2010.
Of particular note are the 334 MW CHP plant due to come on stream
shortly, the 430 MW CCGT currently under construction and other projects
relating to a new 600 MW coal fired plant as well as other renewable
energy facilities with over 1,000 MW of installed capacity. The company
has also been awarded licences to build another CCGT and coal-fired
plant as well as 310 MW in trading activities.
ENDESA will contribute Euro 485 million, plus a further amount of up to
Euro 115 million, payable on the basis of success of some of the wind
farm projects currently in process of obtaining authorisation.
Through its holding in Endesa Hellas, which has already begun
operations, ENDESA has acquired an important stronghold in one of Europe’s
most attractive electricity markets both strategically, given its growth
prospects, and in terms of its pricing structure and interconnections
with Italy, Bulgaria, Macedonia and Albania.
New installations in Italy and France
During the first six months of 2007, Endesa Europa continued
construction as scheduled on the two 400 MW CCGTs units at Scandale
(Calabria) and successfully completed an agreement with Gamesa for the
acquisition of wind assets in Italy. The two last companies to be
included in this agreement, acquired in February this year, own the
construction and operation rights for the Piano di Corda (54 MW) and
Serra Pelata (58 MW) wind farms. Both will come on stream in 2008.
Also, during 1H07 Montecute (42 MW) and Trapani (32 MW) wind farms went
on stream, and July saw the start up of the Poggi Alti plant, with
installed capacity of 20 MW. The total installed capacity for wind power
in Italy now totals 152 MW.
Italy now has nine wind farms either operational or under construction
following the acquisition of the facilities from Gamesa and the others
which are being developed. These farms give Endesa Europa a 15% share of
installed wind capacity in Italy, ensuring that up 77% of its "green
certificates" in the Italian market are provided for and giving it one
of the biggest wind generation operations in the country with installed
capacity of more than 300 MW in operation in 2009.
Meanwhile, in France, in the first half of the year Endesa France’s
first wind farm (Lehaucourt 10 MW) started up and construction of the
Les Vents de Cernon commenced. This will have installed capacity of 17.5
MW and is expected to start operating this year.
Also, on 12 July, Endesa France obtained the construction permit for a
combined cycle plant in the area of Lucy which will have capacity of 400
MW. With this authorisation, Endesa France now has the required permits
to construct three combined cycle plants with a total installed capacity
of 1,600 MW.
In July the company started construction of the Muzillac wind farm (10
MW) which will bring the company’s total wind
assets to 75 MW.
In short, the progress made in developing new capacity during the first
seven months of the year place Endesa France in an excellent position to
meet targets set out in its Industrial Plan, which includes obtaining
2,000 MW in CCGT output and 200 MW in renewable energies output by 2010.
Dividends at Endesa Italia and Snet
In 1H07 Endesa Italia paid shareholders Euro 216 million charged against
2006 earnings of which Euro 173 million corresponded to Endesa Europa.
Snet also paid a dividend of Euro 33 million to its shareholders, of
which Euro 21 million corresponded to Endesa Europa.
EBITDA: Euro 607 million
ENDESA’s business activity in Europe reported
EBITDA of Euro 607 million in 1H07, an increase of 3.4% vs. 1Q06 and
EBIT of Euro 449 million, down 2.2%.
EBITDA & EBIT IN EUROPE
EBITDA (€ m)
EBIT (€ m)
1H07
1H06
% Chg
1H07
1H06
% Chg
Italy
503
485
3.7
396
409
(3.2)
Endesa France
108
102
5.9
58
50
16.0
Trading
21
21
-
21
21
-
Holding & others
(25)
(21)
NA
(26)
(21)
NA
Total
607
587
3.4
449
459
(2.2)
EBITDA and gross margin increase in Italy
As mentioned above, in 1H07 demand for electricity in Italy remained
flat (+0.1%) vs. 1H06 with a significant increase in imports in the
north of the country due to the price differential with France.
These factors, coupled with lower rainfall during the first six months
of the year, meant that utilisation at ENDESA’s
plants in Italy was lower. As a result, electricity generation fell 6.9%
to 12,170 GWh.
Furthermore, these two factors triggered a fall in electricity prices on
the wholesale market and a 2.8% drop in group sales in Italy to 16,314
GWh. which led to a 7.9% decline in revenues.
This was offset by a 9.3% fall in fuel consumption and lower CO2
costs due to a sharp drop in emission rights prices which helped boost
EBITDA by 3.7% compared to 1H06.
ENDESA ITALIA KEY DATA
Euro million
1H 07
1H 06
Difference
% Chg
Revenues
1,384
1,503
(119)
(7.9)
Gross profit
586
562
24
4.3
EBITDA
503
485
18
3.7
EBIT
396
409
(13)
(3.2)
Growing results at Endesa France
Despite a decline in electricity generation triggered by unfavourable
weather conditions, as in the case of Italy, Endesa France’s
results marked a positive trend in 1H07, largely due to lower fixed and
variable costs.
EBITDA in 1H07 rose 5.9% to Euro 108 million and EBIT by 16% to Euro 58
million vs. 1H06.
ENDESA FRANCE KEY DATA
Euro million
1H
07
1H
06
Difference
% Chg
Revenues
521
569
(48)
(8.4)
Gross profit
175
174
1
0.6
EBITDA
108
102
6
5.9
EBIT
58
50
8
16.0
Revenues totalled Euro 521 million in the first six months of the year
with a drop of 8.4% vs. 1H06. This decrease was due to a 31.2% fall in
electricity generation, higher than the figure for the whole system
(production at the Company in France is measured by the mid and peak
hours), and to lower wholesale market prices. However, as we have seen
above, this fall was partially offset by the high weight of sales in the
forward market with favourable prices agreed the previous year.
Mild weather conditions In Poland also affected electricity output of
Endesa France which fell 15.9%. However, tariff review meant revenues
were not as harshly affected.
Variable costs at the Company fell 12.4% to Euro 49 million in 1H07
largely due to lower output. Fixed costs fell 6.9% as a result of the
progress made on the group’s Efficiency Plan.
Lower fixed and variable costs allowed the group to largely offset the
fall in revenues, leading to a 5.9% increase in EBITDA and a 16% rise in
EBIT, to Euro 108 million and Euro 58 million respectively.
European business debt: Euro 1,719 million
Net debt at ENDESA’s electricity business in
Europe stood at Euro 1,719 million at the close of 1H07, an increase of
Euro 45 million, or 2.7%, over the debt balance at the end of 2006.
Net financial results amounted to an expense of Euro 39 million in 1H07,
Euro 14 million higher than in 1H06.
We would recall that in 2H06 debt increased in the European business
line due to investments carried out during the period, leading to a
higher financial expense in 1H07 vs. 1H06.
Cash flow from operating activities: Euro 435 million
Cash flow generated by the group’s business
in Europe totalled Euro 435 million in the first six months of 2007, an
increase of 27.9% with respect to 2006.
Investments: Euro 178 million
Investment in this business area totalled Euro 178 million in 1H07. Of
this amount, Euro 140 million was capex (Euro 91 million Endesa Italy
and Euro 49 million Endesa France).
Financial investment totalled Euro 33 million and included the
acquisition of the Serra Pelata (Euro 14 million) and Piano di Corda
(Euro 8 million) wind farms.
BUSINESS IN LATIN AMERICA
Net Income in Latin America: Euro 176 million
In 1H07 net income at ENDESA’s Latin American
businesses totalled Euro 176 million, a drop of 6.9% on the same period
the previous year (like-for-like).
The fall in net income in this business was due to the fact that Euro 19
million in positive exchange differences were reported in 1H06, compared
to negative differences of Euro 2 million in 1H07 and to the poor
performance of non consolidated companies which recorded losses of Euro
3 million compared to a profit of Euro 8 million in 1H06.
However, operating results were positive, as reflected by the
performance of EBITDA and EBIT. EBITDA in this business area stood at
Euro 1,223 million, an increase of 6.8% compared to the same period in
2006 and EBIT was Euro 956 million, a rise of 5.2%. Measured in local
currency, EBITDA rose 10.8% and EBIT 9.1%.
We would point out that these increases occurred despite a challenging
operating environment with lower rainfall and gas supply difficulties.
Highlights
Growth in volume sales in generation and distribution
The positive macroeconomic environment in the countries where ENDESA has
subsidiaries led to sharp increases in demand during 1H07, especially in
Peru (10.5%), Chile (6.2%) and Argentina (5.9%).
As a result, total distribution sales at these companies rose 6.6% to
30,440 GWh, with Argentina (8.4%), Peru (7.7%) and Colombia (7.1%)
performing particularly well.
As mentioned above, the generation business was affected by gas supply
problems during the first six months of 2007 and also lower rainfall in
Chile and Argentina. This led to a fall in hydro output and an increase
in liquid fuel output.
Accumulated output during 1H07 was 29,836 GWh, 0.3% higher than the same
period in 2006. The increase in output in Peru (24.6%), due to the new
Ventanilla CCGT coming on stream and in Chile (4.5%) due to higher
thermal output, helped offset the declines in Brazil (14.3%) due to lack
of gas and also in Colombia (9%) and Argentina (3.1%) due to lower hydro
output.
OUTPUT AND SALES IN THE LATIN AMERICAN BUSINESS
Output (GWh)
Sales (GWh)
1H 07
% Chg
vs. 1H 06
1H 07
% Chg
vs. 1H 06
Chile
9,558
4.5
6,449
5.9
Argentina
8,741
(3.1)
7,887
8.4
Peru
4,159
24.6
2,582
7.7
Colombia
5,514
(9.0)
5,562
7.1
Brazil
1,864
(14.3)
7,960
4.8
GRAND TOTAL
29,836
0.3
30,440
6.6
Improvement in generation, transmission and distribution margins
The favourable performance of ENDESA’s
generation subsidiaries, particularly in the first quarter of the year,
led to an 8.8% increase in the unit margin to 28.3US$/MWh during 1H07.
Generation margins, measured in dollars, rose sharply in Colombia
(35.3%) due to higher prices in the energy spot market being charged to
final customers as well as lower rainfall and a higher capacity charges.
Meanwhile, Brazil saw margins rise 21.1% due to a higher average sales
price and an improved production mix while in Argentina the 20.8%
increase was due to more favourable spot prices. In Chile, the average
margin fell 3.1% due to a worse production mix resulting from a lower
hydro component and higher thermal output using diesel due to gas supply
problems. In Peru, the production mix, with a larger thermal component,
and lower prices to the final customer caused a 9.7% reduction in the
average margin vs. 1H06.
In the transmission business, at the beginning of June Brazilian company
Cien signed an agreement with CAMESA to export up to 700 MW of energy to
Argentina between June and September this year. The company will be paid
a fixed toll of USD 5 million/month plus a variable toll of USD5.5/MWh
depending on the energy transmitted.
In the distribution business, rising demand, the application of a new
tariff regime in Argentina and companies’
operating efficiency improvements all led to considerable improvement in
operating indicators. The unit margin stood at 41.2US$/MWh distributed,
an increase of 13.8% vs. 1H06.
After factoring in the effect of retroactive application of tariffs in
Argentina, the unit margin shows an 8.3% increase over 1H06. Only Chile
saw its unit margin fall following the application of new
subtransmission tariffs at Chilectra in 2007 although this effect was
offset by higher sales.
Reduction in distribution losses
Energy distribution losses were 11.3% in 1H07, an improvement of 0.1
percentage points on the same period in 2006.
We would highlight the 0.2 percentage point improvement in Brazil due to
introduction of new initiatives for fighting fraud.
New capacity development
In 1H07 Endesa Chile continued with construction of the San Isidro II
(Chile) CCGT power plant which will have installed capacity of 377 MW.
In 2Q07, and within the established time frame, the open cycle of this
plant came on stream with an output of 248 MW. This output is 28 MW
greater than the projected output thanks to technical improvements
achieved whilst the project was under development.
The company also continued work on construction of the 32 MW Palmucho
hydro plant.
Work also continued on the Aysén project
which entails the construction, starting in 2008, of four hydro plants
with total installed capacity of 2,400 MW, the last of which is
currently estimated to come on stream towards the end of 2018. Endesa
Chile and Colbún hold 51% and 49% stakes,
respectively, in this project.
In June, once all pertinent permits were obtained, work began on the
Bocamina II coal-fired plant in Chile. The plant will have an estimated
installed capacity of 345 MW and is due to begin operations in 2010.
Also, in May the necessary commercial agreements were signed to give the
definitive push for the construction of the Quintero (Chile) liquefied
natural gas plant, in which Endesa Chile will hold a 20% stake. Its
partners in the project are British Gas, Metrogas and ENAP.
Also, Endesa Eco continued work on construction of the Canela wind farm,
the first stage of which will have capacity of 9MW (total capacity will
be 18 MW) and the Ojos de Agua mini hydro station, also with capacity of
9 MW.
Lastly, in Colombia work is due to begin this year on repowering the El
Guavio hydro plant which will increase installed capacity by 49 MW.
Also, work on the second unit of the Termocartagena fuel-oil plant will
commence, adding an additional 68 MW to the plant’s
current 142 MW installed capacity.
Regulatory update
In Argentina, Edesur began implementing the first distribution tariff
increase since the economic crisis of 2001 following publication of the
corresponding resolution by the electricity sector regulator “ENRE”.
The application of this increase, which is effective from November 2005,
will enable Edesur to regain appropriate levels of profitability and
make necessary investments to meet increasing demand in its market and
continue to improve its service quality while simultaneously enhancing
service quality.
A resolution by sector regulator “ENRE”
published on 18 July granted an extension of the conclusion of the first
period of Edesur concession contract until 2013. The 95 yr concession
agreement is broken down into periods. The first period extends for 5
years after start of the integral tariff review. This review will be in
effect on 1 February 2008, and if all dates due are met by Argentinean
authorities the first period is set to conclude on 1 February 2013.
Additionally, due to the existing deficit situation, Argentinean energy
authorities proposed an extension of Foninvemem financing during 2007.
On 15 June, ENDESA’s affiliates subscribed to
the official public tender (2007 50% withholding) without obligation of
financing increase.
In Brazil, the tariff readjustment approved by the electricity regulator
ANEEL for Ampla came into effect on 15 March. This readjustment will be
in force for one year and increases the distribution accumulative value
(VAD) by 9.6%.
Meanwhile, on 2 April Coelce’s tariffs began
to factor in the tariff overhaul which is carried out every four years
leading to a 6.35% reduction in the VAD. This is only provisional with
the definitive tariff being set in 2008 once the ANEEL has calculated
the tariff for all of Brazil’s distributors.
Lastly, the node price report for the April-October half year was
published in Chile. Price increased by 6% vs. 1H06 to 73.3 US$/MWh.
Gas Atacama
Gas Atacama’s financial situation was
seriously affected by the lack of availability of gas from Argentina.
ENDESA holds an 18.2% stake in this company via its 50% stake in Endesa
Chile.
At the same time, CMS, holder of 50% of Gas Atacama, began the process
of selling its stake along with the loans granted to the company. Endesa
Chile exercised its pre-emptive acquisition rights and has agreed to
simultaneously sell both the stake and the related loans to Southern
Cross for the same amount.
Gas Atacama has signed various framework agreements and endorsements to
change electricity supply contracts to more advantageous ones which will
improve its operating and financial situation.
The agreements signed by Gas Atacama include the compulsory condition
that Endesa Chile must exercise its pre-emptive acquisition right over
CMS’ stake and loans to Gas Atacama and sell
these to Southern Cross. This was the determining factor in the company’s
decision.
Given the current situation, the Group carried out an impairment test as
of 30 June 2007, taking into account the above-mentioned agreements. The
results do not suggest that any value adjustment needs to be made to the
stake.
EBITDA: +6.8%
EBITDA in Latin American business totalled Euro 1,223 million in 1H07, a
6.8% increase on 1H06. EBIT rose 5.2% to Euro 956 million.
EBITDA & EBIT IN LATIN AMERICA
EBITDA (Euro million)
EBIT (Euro million)
1H
07
1H 06
% Chg
1H
07
1H06
% Chg
Generation and transmission
619
613
1.0
472
492
(4.1)
Distribution
637
556
14.6
522
446
17.0
Other
(33)
(24)
NA
(38)
(29)
NA
GRAND TOTAL
1,223
1,145
6.8
956
909
5.2
Measured in local currency, EBITDA rose 10.8% and EBIT 9.1%.
The table below shows the breakdown of EBITDA and EBIT of ENDESA’s
fully consolidated subsidiaries by business line and country in 1H07:
BREAKDOWN OF EBITDA AND EBIT IN LATAM BY BUSINESS LINE AND COUNTRY
Generation and transmission
EBITDA (Euro million)
EBIT
(Euro million)
1H 07
1H 06
% Chg
1H 07
1H 06
% Chg
Chile
258
291
(11.3)
201
248
(19.0)
Colombia
118
107
10.3
95
85
11.8
Brazil - Generation
81
65
24.6
71
55
29.1
Peru
75
79
(5.1)
51
59
(13.6)
Argentina - Generation
68
66
3.0
44
49
(10.2)
TOTAL Generation
600
608
(1.3)
462
496
(6.9)
Interconnection Brazil-Argentina
19
5
280.0
10
(4)
NA
TOTAL Generation and transmission
619
613
1,0
472
492
(4.1)
Distribution
EBITDA (Euro million)
EBIT (Euro million)
1H 07
1H 06
% Chg
1H 07
1H 06
% Chg
Chile
98
102
(3.9)
86
89
(3.4)
Colombia
133
129
3.1
98
98
-
Brazil
276
232
19.0
235
195
20.5
Peru
47
42
11.9
32
27
18.5
Argentina
83
51
62.7
71
37
91.9
TOTAL Distribution
637
556
14.6
522
446
17.0
Generation and transmission
Chile
In 1H07 energy generated totalled 9,558 GWh, up 4.5% on the same period
in 2006. This increase was due to low rainfall during the period and
also the lack of availability of gas from Argentina, leading to
significant rises in costs. Fuel costs rose 184.6% while power purchases
advanced 55.5%.
As a result, in 1H07 EBITDA fell 11.3% to Euro 258 million while EBIT
dropped 19% to Euro 201 million compared to 1H06.
Colombia
Both generation EBITDA and EBIT in Colombia rose significantly despite
being affected by a tax reform affecting companies’
assets at 31 December 2006, which totalled Euro 18 million.
This good performance was due to higher capacity payments at Emgesa
following the introduction of the new Reliability Charge on the one
hand, and better margin obtained on the sale of electricity in the
market to partially offset the 9% decline in generation, caused
primarily by impact of the meteorological phenomenon known as “El
Niño” on output
at the Betania plant.
Consequently, EBITDA rose 10.3% to Euro 118 million compared to the same
period in 2006 while EBIT totalled Euro 95 million (+11.8%).
Brazil - Generation
ENDESA’s subsidiaries in Brazil generated a
total of 1,864 GWh in 1H07, 14.3% less than in 1H06 due to gas supply
problems which affected the Fortaleza plant.
Lower thermal generation was offset with larger purchases on the spot
market at lower prices to meet contractual electricity supply
obligations and with the division’s improved
generation mix resulting from the increase in its hydro output.
Consequently, EBITDA rose 24.6% to Euro 81 million while EBIT increased
29.1% to Euro 71 million.
Peru
ENDESA’s subsidiaries in Peru generated
total output in 1H07 of 4,159 GWh, 24.6% more than in 1H06.
This growth was due to the company’s higher
thermal and hydro output resulting from incorporation of the gas units
of the 142 MW Ventanilla CCGT and increased contribution of the Piura
power station, which was off stream for two and a half months last year.
However, increase in output failed to fully offset the fall in sale
prices; as a result revenues fell 0.7%. This fall, together with impact
on the costs of increased thermal production, caused EBITDA to decrease
5.1% to Euro 75 million and EBIT by 13.6% to Euro 51 million.
Argentina
ENDESA’s subsidiaries in Argentina generated
total output of 8,741 GWh in 1H07, 3.1% lower than in 1H06, largely due
to lower hydro output. However, sales rose 18% due to higher prices.
LOW rainfall and gas supply difficulties continued to trigger increases
in fuel costs due to the need to generate power using liquid fuels,
higher prices were sufficient to improve profitability.
Therefore, EBITDA was Euro 68 million, up 3% on 1H06, while EBIT stood
at Euro 44 million, a 10.2% decrease.
Interconnection between Argentina and Brazil
Given the problems in exporting electricity from Argentina to Brazil
arising from gas supply difficulties affecting use of the
interconnection line, Cien, the line operator, is looking at changing
its business model so that it becomes profitable again.
During the beginning of June the company signed an export agreement of
700MW with CAMMESA for the period June to September 2007. The company
will receive a fixed toll of US$ 5 million per month plus a variable of
5.5US$/MWh.
This agreement allows usage of the line to transmit electricity from
Brazil to Argentina with the corresponding toll being charged.
As a result, interconnection’s EBITDA
totalled Euro 19 million in 1H07, Euro 14 million more than in 1H06.
EBIT totalled Euro 10 million, some Euro 14 million more than during the
first six months of 2006.
Distribution
Chile
Sales in Chile rose 4.9% largely due to the 5.9% increase in electricity
sold.
However, this growth did not offset the decline in the unit margin due
to applying the new subtransmission tariff IN THE PERIOD and
consequently put EBITDA at Euro 98 million, 3.9% less and EBIT at Euro
86 million, 3.4% less.
Colombia
Both EBITDA and EBIT at the Colombian generation business were affected
by the one-off impact of the above-mentioned tax on companies’
assets at 31 December 2006, which totalled Euro 11 million.
Nevertheless, EBITDA rose 3.1% to Euro 133 million. EBIT totalled Euro
98 million, the same as in 1H06. The 8.7% increase in the gross margin
due to a higher sales volume (7.1%) was not enough to offset the
negative result of the mentioned one-off.
Brazil
Sales reported by the Brazilian distribution business stood at Euro 845
million in the first half of 2007, a 3.7% increase on 2006. This was
partly due to a 4.8% increase in volumes of energy sold and partly to a
considerable increase in the unit margin due to application of lower
surcharges.
The increase in sales, the significant decline in energy losses and
increase of margins led to increases in EBITDA and EBIT of 19% and
20.5%, respectively, to Euro 276 million and Euro 235 million vs. 1H06.
Peru
EBITDA from distribution in Peru came to Euro 47 million in 1H07, an
11.9% increase on 1H06, basically due to the 7.7% rise in energy
distributed.
Meanwhile, EBIT rose 18.5% to Euro 32 million.
Argentina
Sales at Argentine distribution business increased by 27% largely as a
result of the increase in energy distributed (8.4%) on the one hand, and
of the booking of Euro 40 million in 1Q07 from the tariff increase
approved retroactively from November 2005. This was applied following
publication of the corresponding resolution by electricity sector
regulator “ENRE”.
This led to a 62.7% increase in EBITDA, to Euro 83 million, and a 91.9%
rise in EBIT, to Euro 71 million.
Financial results: Euro 269 million
Net financial results at ENDESA’s Latin
American business amounted to an expense of Euro 269 million in 1H07,
Euro 25 million higher than in 1H06.
Net exchange-rate gains were Euro 21 million lower, down from Euro 19
million in 1H06 to a negative difference of Euro 2 million in the first
half of this year.
Net financial expenses totalled Euro 267 million in 1H07, Euro 4 million
or 1.5% higher than in 1H06.
Net debt at ENDESA’s Latin American business
stood at Euro 5,874 million at 30 June, 2007, an increase of Euro 256
million since the start of the year.
Rating upgrade
On 3 July, rating agency Standard & Poor´s
upgraded its rating for Enersis and Endesa Chile by one notch from “BBB-“
to “BBB”, both
with a stable outlook.
These new ratings reflect the improved financial profile of both
companies and the agency’s expectations for
a favourable economic scenario in Latin America.
Cash flow from operating activities: +18.7%
Cash flow generated by the group’s business
in Latin America totalled Euro 805 million in the first half of 2007, an
increase of 18.7% with respect to the same period in 2006.
Cash returns: USD 343 million
In May Enersis paid a final dividend against 2006 results representing
an income of USD 184 million for parent company ENDESA. This dividend
provided Cash returns from ENDESA’s Latin
American business totalling USD 343 million.
The amount obtained in 1H07, added to the USD 561 million of returns in
2005 and 2006, means the company has achieved 56.5% of its current
strategic target of USD1,600 million.
Investments: Euro 472 million
Investment in Latin America in 1H07 totalled Euro 472 million, of which
Euro 347 million corresponded to capex.
By business line, investments in tangible assets (capex) break down as
follows:
CAPITAL EXPENDITURE IN LATIN AMERICA
Euro million
1H
07
1H
06
% Chg
Generation
123
140
(12.1)
Distribution and Transmission
192
220
(12.7)
Other
32
8
300.0
TOTAL
347
368
(5.7)
Financial investments in the period include acquisitions by Endesa Chile
in February and March of third-party stakes in Costanera (5.5%),
Hidroinvest (25%) and Hidroeléctrica El Chocón
(2.48%).
STATISTICAL APPENDIX
KEY FIGURES
Electricity Generation Output (GWh)
1H07
1H06
% Chg.
Business in Spain and Portugal
46,385
44,875
3.4
Business in Europe
16,182
18,671
(13.3)
Business in Latin America
29,836
29,736
0.3
TOTAL
92,403
93,282
(0.9)
Electricity Generation Output in Spain&Portugal GWh)
1H07
1H06
% Chg.
Mainland
39,302
38,025
3.4
Nuclear
11,719
11,609
0.9
Coal
17,569
16,821
4.4
Hydro
4,743
4,001
18.5
Combined Cycle (CCGT)
3,574
3,882
(7.9)
Fuel oil
157
476
(67.0)
Renwables/CHP
1,540
1,236
24.6
Non-mainland
7,083
6,850
3.4
TOTAL
46,385
44,875
3.4
Electricity Generation Output in Europe (GWh)
1H07
1H06
% chg.
Coal
7,068
8,796
(19.6)
Hydro
779
1,358
(42.6)
Combined Cycle (CCGT)
6,678
5,898
13.2
Fuel oil
1,566
2,605
(39.9)
Wind
91
14
550.0
TOTAL
16,182
18,671
(13.3)
Electricity Generation Output in Latin America (GWh)
1H07
1H06
% chg.
Chile
9,558
9,147
4.5
Argentina
8,741
9,018
(3.1)
Peru
4,159
3,339
24.6
Colombia
5,514
6,058
(9.0)
Brazil
1,864
2,174
(14.3)
TOTAL
29,836
29,736
0.3
Electricity Sales (GWh)
1H07
1H06
% chg.
Business in Spain and Portugal
56,232
53,176
5.7
Regulated market
36,400
34,290
6.2
Deregulated market
19,832
18,886
5.0
Business in Europe
25,486
26,635
(4.3)
Italy
16,314
16,778
(2.8)
France
8,331
8,857
(5.9)
Poland
841
1,000
(15.9)
Business in Latin America
30,440
28,549
6.6
Chile
6,449
6,088
5.9
Argentina
7,887
7,274
8.4
Peru
2,582
2,398
7.7
Colombia
5,562
5,193
7.1
Brazil
7,960
7,596
4.8
TOTAL
112,158
108,360
3.5
Gas sales (GWh)
1H07
1H06
% chg.
Regulated market
1,452
1,461
(0.6)
Deregulated market
15,086
11,753
28.4
TOTAL
16,538
13,214
25.2
Workforce
30-06-07
30-06-06
% chg.
Business in Spain and Portugal
12,719
12,725
-
Business in Europe
2,134
2,114
0.9
Business in Latin America
12,050
11,974
0.6
TOTAL
26,903
26,813
0,3
FINANCIAL DATA
Key figures
1H07
1H06
% chg.
EPS (Euros)
1.19
1.66
(28.5)
CFPS (Euros)
2.43
2.15
13.1
BVPS (Euros)
10.81
9.98
8.3
Net financial debt (Euro million)
30-06-07
31-12-06
% chg.
Business in Spain and Portugal
12,719
12,548
1.4
Business in Europe
1,719
1,674
2.7
Endesa Italia
754
748
0.8
Other
965
926
4.2
Business in Latin America
5,874
5,618
4.6
Enersis
5,207
4,749
9.6
Other
667
869
(23.2)
TOTAL
20,312
19,840
2.4
Financial leverage (%)
124.0
124.5
-
Net debt/ Operating cash flow (times)
2.7
2.8
-
Interest coverage by operating cash flow (times)
7.4
7.4
-
"Ratings (25-07-07)
Long-term
Short-term
Outlook
Standard & Poor’s
A
A-1
Revised (-)
Moody’s
A3
P-2
Revised (-)
Fitch
A+
F-1
Revised (-)
Main fixed-income issues ENDESA
Spread over IRS (bp)
30-06-07
31-12-06
2.2Y Euro 700M 4.375% Mat. June 2009
-9
6
5.2Y GBP400M 6.125% Mat. June 2012
20
25
5.9Y Euro 700M 5.375% Mat. Feb 2013
12
24
Stock market date
29-06-07
29-12-06
% chg.
Market cap (Euro million )
42,572
37,935
12.2
Number of shares outstanding
1,058,752,117
1,058,752,117
--
Nominal share value (Euro)
1.2
1.2
--
Stock market date (*)
1H07
1H06
% chg.
Trading volumes (shares)
Madrid Stock Exchange
2,100,150,703
1,382,592,695
51.9
NYSE
14,636,204
12,133,200
20.6
Average daily trading volume (shares)
Madrid Stock Exchange
16,667,863
10,792,958
54.4
NYSE
118,994
97,066
22.6
(*) Source: Bloomberg
Share price
1H07 high
1H07 low
29-06-07
29-12-06
Madrid Stock Exchange (euros)
40.64
35.21
40.21
35.83
NYSE (US$)
55.03
45.38
52.82
46.52
Dividends (Euro cents / share)
Payable against 2006 results
Interim dividend (02-01-2007)
50.00
Special dividend (02-07-2007)
114.00
Total DPS
164.00
Pay-out (%)
58.48
Dividend yield (%)
4.58
Important legal disclaimer
This document was made available to shareholders of Endesa, S.A.. In
relation with the announced joint offer by ENEL SpA and Acciona, S.A.,
Endesa shareholders are urged to read the report of Endesa’s
board of directors when it is filed by the Company with the Comisión
Nacional del Mercado de Valores (the "CNMV"), as well as Endesa's
Solicitation/Recommendation Statement on Schedule 14D-9 when it is filed
by the Company with the U.S. Securities and Exchange Commission (the
"SEC"), as it will contain important information. Such documents and
other public filings made from time to time by Endesa with the CNMV or
the SEC are available without charge from the Endesa’s
website at www.endesa.es, from the
CNMV’s website at www.cnmv.es
and from the SEC’s website at www.sec.gov
and at Endesa’s principal executive offices
in Madrid, Spain.
This presentation contains certain “forward-looking”
statements regarding anticipated financial and operating results and
statistics and other future events. These statements are not guarantees
of future performance and they are subject to material risks,
uncertainties, changes and other factors that may be beyond ENDESA’s
control or may be difficult to predict.
Forward-looking statements include, but are not limited to, information
regarding: estimated future earnings; anticipated increases in wind and
CCGTs generation and market share; expected increases in demand for gas
and gas sourcing; management strategy and goals; estimated cost
reductions; tariffs and pricing structure; estimated capital
expenditures and other investments; estimated asset disposals; estimated
increases in capacity and output and changes in capacity mix; repowering
of capacity and macroeconomic conditions. For example, the EBITDA (gross
operating profit as per ENDESA’s
consolidated income statement) target for 2007-2009 included in this
presentation are forward-looking statements and are based on certain
assumptions which may or may not prove correct. The main assumptions on
which these expectations and targets are based are related to the
regulatory setting, exchange rates, divestments, increases in production
and installed capacity in markets where ENDESA operates, increases in
demand in these markets, assigning of production amongst different
technologies, increases in costs associated with higher activity that do
not exceed certain limits, electricity prices not below certain levels,
the cost of CCGT plants, and the availability and cost of the gas, coal,
fuel oil and emission rights necessary to run our business at the
desired levels. In these statements we avail ourselves of the protection
provided by the Private Securities Litigation Reform Act of 1995 of the
United States of America with respect to forward-looking statements.
The following important factors, in addition to those discussed
elsewhere in this presentation, could cause actual financial and
operating results and statistics to differ materially from those
expressed in our forward-looking statements:
Economic and industry conditions: significant adverse changes in the
conditions of the industry, the general economy or our markets; the
effect of the prevailing regulations or changes in them; tariff
reductions; the impact of interest rate fluctuations; the impact of
exchange rate fluctuations; natural disasters; the impact of more
restrictive environmental regulations and the environmental risks
inherent to our activity; potential liabilities relating to our nuclear
facilities.
Transaction or commercial factors: any delays in or failure to obtain
necessary regulatory, antitrust and other approvals for our proposed
acquisitions or asset disposals, or any conditions imposed in connection
with such approvals; our ability to integrate acquired businesses
successfully; the challenges inherent in diverting management's focus
and resources from other strategic opportunities and from operational
matters during the process of integrating acquired businesses; the
outcome of any negotiations with partners and governments. Delays in or
impossibility of obtaining the pertinent permits and rezoning orders in
relation to real estate assets. Delays in or impossibility of obtaining
regulatory authorisation, including that related to the environment, for
the construction of new facilities, repowering or improvement of
existing facilities; shortage of or changes in the price of equipment,
material or labour; opposition of political or ethnic groups; adverse
changes of a political or regulatory nature in the countries where we or
our companies operate; adverse weather conditions, natural disasters,
accidents or other unforeseen events, and the impossibility of obtaining
financing at what we consider satisfactory interest rates.
Political/governmental factors: political conditions in Latin America;
changes in Spanish, European and foreign laws, regulations and taxes.
Operating factors: technical problems; changes in operating conditions
and costs; capacity to execute cost-reduction plans; capacity to
maintain a stable supply of coal, fuel and gas and the impact of the
price fluctuations of coal, fuel and gas; acquisitions or restructuring;
capacity to successfully execute a strategy of internationalisation and
diversification.
Competitive factors: the actions of competitors; changes in competition
and pricing environments; the entry of new competitors in our markets.
Further details on the factors that may cause actual results and other
developments to differ significantly from the expectations implied or
explicitly contained in the presentation are given in the Risk Factors
section of Form 20-F filed with the SEC and in the ENDESA Share
Registration Statement filed with the Comisión
Nacional del Mercado de Valores (the Spanish securities regulator or the “CNMV”
for its initials in Spanish).No assurance can be given that the
forward-looking statements in this document will be realised. Except as
may be required by applicable law, neither Endesa nor any of its
affiliates intends to update these forward-looking statements.