Filed by Gas Natural SDG, S.A. pursuant to
Rule 425 of the Securities Act of 1933
Subject Company: Endesa, S.A.
Commission File No.: 333-07654
This communication is not an offering document and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The exchange offer will commence only (1) following approval of a final offer document by the SpanishComisión Nacional del Mercado de Valores (CNMV) and publication thereof and (2) on or after the date on which Gas Natural SDG, S.A. (Gas Natural) files a Registration Statement on Form F-4 with the U.S. Securities and Exchange Commission (SEC) relating to the exchange offer.
Investors in ordinary shares of Endesa, S.A. (Endesa) should not subscribe for any securities referred to herein except on the basis of the final approved and published offer document that will contain information equivalent to that of a prospectus pursuant to Directive 2003/71/EC and Regulation (EC) No. 809/2004. Investors and security holders may obtain a free copy of such final offer document (once it is approved and published) at the registered offices of Gas Natural, Endesa, the CNMV or the Spanish Stock Exchanges.
Investors in American Depositary Shares of Endesa and U.S. holders of ordinary shares of Endesa are urged to read the U.S. prospectus and tender offer statement regarding the exchange offer, when it becomes available, because it will contain important information. The U.S. prospectus and tender offer statement will be filed with the SEC as part of its Registration Statement on Form F-4. Investors and security holders may obtain a free copy of the U.S. prospectus and tender offer statement (when available) and other documents filed by Gas Natural with the SEC at the SEC’s website at www.sec.gov. A free copy of the U.S. prospectus and tender offer statement (when available) may also be obtained for free from Gas Natural.
These materials may contain forward-looking statements based on management’s current expectations or beliefs. These forward-looking statements may relate to, among other things:
| • | management strategies; |
| • | synergies and cost savings; |
| • | integration of the businesses; |
| • | market position; |
| • | expected gas and electricity mix and volume increases; |
| • | planned asset disposals and capital expenditures; |
| • | net debt levels and EBITDA and earnings per share growth; |
| • | dividend policy; and |
| • | timing and benefits of the offer and the combined company. |
These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forwarding-looking statements, including, but not limited to, changes in regulation, the natural gas and electricity industries and economic conditions; the ability to integrate the businesses; obtaining any applicable governmental approvals and complying with any conditions related thereto; costs relating to the offer and the integration; litigation; and the effects of competition.
Forward-looking statements may be identified by words such as “believes,” “expects,” “anticipates,” “projects,” “intends,” “should,” “seeks,” “estimates,” “future” or similar expressions.
These statements reflect our current expectations. In light of the many risks and uncertainties surrounding these industries and the offer, you should understand that we cannot assure you that the forward-looking statements contained in these materials will be realized. You are cautioned not to put undue reliance on any forward-looking information.
This communication is not for publication, release or distribution in or into or from Australia, Canada or Japan or any other jurisdiction where it would otherwise be prohibited.
* * *
The following is a presentation by Gas Natural SDG, S.A. relating to the offer by Gas Natural SDG for 100% of the share capital of Endesa.
2
 1 Creating a leading, fully integrated global energy company Press conference Barcelona, February 6, 2006 |
 2 Disclaimer and Important Legal Information This communication is not an offering document and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The exchange offer will commence only (1) following approval of a final offer document by the Spanish Comisión Nacional del Mercado de Valores (CNMV) and publication thereof and (2) on or after the date on which Gas Natural SDG, S.A. (Gas Natural) files a Registration Statement on Form F-4 with the U.S. Securities and Exchange Commission (SEC) relating to the exchange offer. Investors in ordinary shares of Endesa, S.A. (Endesa) should not subscribe for any securities referred to herein except on the basis of the final approved and published offer document that will contain information equivalent to that of a prospectus pursuant to Directive 2003/71/EC and Regulation (EC) No. 809/2004. Investors and security holders may obtain a free copy of such final offer document (once it is approved and published) at the registered offices of Gas Natural, Endesa, the CNMV or the Spanish Stock Exchanges. Investors in American Depositary Shares of Endesa and U.S. holders of ordinary shares of Endesa are urged to read the U.S. prospectus and tender offer statement regarding the exchange offer, when it becomes available, because it will contain important information. The U.S. prospectus and tender offer statement will be filed with the SEC as part of its Registration Statement on Form F- 4. Investors and security holders may obtain a free copy of the U.S. prospectus and tender offer statement (when available) and other documents filed by Gas Natural with the SEC at the SEC’s website at www.sec.gov. A free copy of the U.S. prospectus and tender offer statement (when available) may also be obtained for free from Gas Natural. These materials may contain forward-looking statements based on management’ s current expectations or beliefs. These forward-looking statements may relate to, among other things: • management strategies; • synergies and cost savings; • integration of the businesses; • market position; • expected gas and electricity mix and volume increases; • planned asset disposals and capital expenditures; • net debt levels and EBITDA and earnings per share growth; • dividend policy; and • timing and benefits of the offer and the combined company. These forward- looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forwarding-looking statements, including, but not limited to, changes in regulation, the natural gas and electricity industries and economic conditions; the ability to integrate the businesses; obtaining any applicable governmental approvals and complying with any conditions related thereto; costs relating to the offer and the integration; litigation; and the effects of competition. Forward-looking statements may be identified by words such as “believes,” “expects,” “anticipates,” “projects,” “intends,” “should,” “seeks,” “estimates,” “future” or similar expressions. These statements reflect our current expectations. In light of the many risks and uncertainties surrounding these industries and the offer, you should understand that we cannot assure you that the forward- looking statements contained in these materials will be realized. You are cautioned not to put undue reliance on any forward-looking information. This communication is not for publication, release or distribution in or into or from Australia, Canada or Japan or any other jurisdiction where it would otherwise be prohibited. This communication is for distribution only to persons who (i) have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc”) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or (iii) are persons falling within Article 47 of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“ financial journalists”) (all such persons together being referred to as “relevant persons”). This communication is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. This communication, which has not been and will not be submitted to the French Autorité des marchés financiers, is made available in France only to qualified investor (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restraint d’investisseurs), provided in each case that such investors are acting for their own account, and/or to persons providing portfolio management financial services (personnes fournissant le service d’investissement de gestion de portefeuille pour compte de tiers), all as defined and in accordance with Article L. 411- 2 of the French Code monétaire et financier and Decreee no. 2005-1007 dated 2 August 2005. The following is a communication from Gas Natural SDG, S.A. related to a presentation in connection with the offer by Gas Natural SDG for 100% of the share capital of Endesa. |
 3 Introduction Remedy Plan Conclusions Next steps Endesa in the current context |
 4 Introduction Remedy plan Conclusions Next steps Endesa in the current context |
 5 A transforming transaction to accelerate profitable growth Global leading integrated gas and power company with strong energy management capabilities Client-focused multinational leader with over 30 million customer accounts Complementary, high-quality asset positions in fast growing markets |
 6 Gas Natural Flexible and competitive gas sourcing on global basis Equity gas projects (Gassi Touil and Gassi Chergui) Endesa Long-standing track record in operating generation assets A leading global integrated utility, with a unique gas position Unique track record in gas distribution build-out and operation Highly customer-focused business Successful CCGT build-up strategy Strong LNG management capabilities Early mover into high growth markets Proactive expansion into LatAm has established Endesa as leader Successful track record in Italy, including repowering plants Strong electricity distribution operator Complementary core skills and asset positions Current territorial structure will be reinforced with the personnel of both Groups |
 7 The transaction is advancing as planned Pending approval from the CNMV / SEC 2005 September October November December 2006 2006 January February March April Competition (Function XV) “Competition Defence Service” (SDC) “Competition Defence Tribunal” (TDC) Council of Ministers Spanish Competition Authorities Regulated activities (Function XIV) CNE Golden Share CNMV review CNMV SEC European Commission European Commission Authorities Final regulatory approval Acceptance period US Acceptance period General Secretary of Energy SEC review Pending CNMV / SEC approval Note: Tentative calendar, subject to changes, as per the Analyst Presentation on November 23, 2005 |
 8 A transaction with benefits for consumers and the general public Reinforces the country’s security of energy supply through a stronger position in the international markets Investment commitment that will allow the improvement of the quality of power supply to clients Transfer of synergies associated with the transaction to consumers will allow savings for clients Improvement in the sector competitive situation and contribution to its necessary restructuring |
 9 Introduction Remedy plan Conclusions Next steps Endesa in the current context |
 10 Auction, for a three years period, of gas equivalent to the gas imported by Endesa in Spain in 2005 Auction, for a three years period, of the annual excess (up to 1bcm) of the contract with Algeria (denominated Sagane I) not destined to the tariff market Reinvestment of the margin obtained during the first 2 years in distribution, transport and storage activities Sale of Endesa’s stake in the Sagunto and Mugardos regasification plants Reduction of the stake in Enagás to 1% and exit from its Board of Directors Summary of the Council of Ministers’ main conditions Natural gas procurement and transport |
 11 Sale of generation plants operating in mainland Spain totalling 4,300 MW installed capacity, with a useful life of at least 10 years At least 400 MW in Catalonia and 400 MW in Andalusia At least 1,200 MW of CCGTs and / or hydro modulable The disposed CCGTs will have gas procurement guaranteed for 2 years Asset sale to be completed over a specified time frame New Group not allowed to buy CCGTs for 2 years Right to unilateral cancellation of the gas procurement contracts offered to power competitors’ CCGTs Summary of the Council of Ministers’ main conditions Power generation |
 12 Sale of 1.5 million gas customer connections Sale of volume equivalent to Endesa’s gas supply and Gas Natural’s power supply businesses Sale of stakes in Naturgas and GasNalsa Functional separation between liberalised and regulated activities Assignment to an independent entity of the capacity to formalise the change in supplier in the overlapping areas Natural gas and electricity distribution and supply The detailed remedy plan will be agreed with the SDC Summary of the Council of Ministers’ main conditions |
 13 Main differences with Gas Natural’s initial proposal Power generation Natural gas and electricity distribution and supply Natural gas procurement and transport The initial plan only included divestments in the Sagunto and Mugardos regasification plants Sale of additional 1,200 MW of mainland capacity in operation Partial geographic specification (Andalusia and Catalonia) Specification of the plant types to be sold Gas procurement associated to the CCGT plants sold Sale of additional 250,000 gas customer connections Independent agency to manage the change of supplier Functional separation between liberalised and regulated activities |
 14 Main procedural aspects Limitations on the management of assets to be sold Divestments procedure The package divested will include all the assets and support functions required for its autonomous operation The sale is subject to the prior approval by the SDC Suitability of buyers Limitations associated with assets to be sold Limit on decisions that would threaten the autonomous management of the asset and its standalone value Access to sensitive technical or commercial information regarding the Endesa’s assets to be sold restricted The Government will appoint an independent trustee to manage the assets being divested Divestments calendar Presentation of the Remedies Plan to the SDC in 1 month Approval by the SDC in 1 month (following CNE report) SDC supervision If an agreement with the buyer/s has not been reached after a certain time, a trustee will be assigned to manage the divestment process The Council of Ministers conditions do not affect the conditions set by the CNE (Function XIV) The procedure for the sale of assets and businesses included in the Council of Ministers’ decision allows for the sale of assets at market value |
 15 Integrated management of customers Flexible and competitive gas procurement Diversified generation portfolio Attractive business mix and investment profile Gas and power convergence Significant synergy potential The strategic, industrial and financial benefits of the transaction are compatible with the fulfilment of the conditions set by the Council of Ministers |
 16 The New Group will become a key integrated European player Enel E.ON RWE Suez New Group 4 Centrica GdF Gas Clients (m)² Source: Annual reports and analyst presentations 1 Listed companies only (before announcement of the transaction), excluding state -owned companies, presented on a consolidated basis; includes only gas and electricity clients; Source: Company estimates 2 Global clients 3 2007 target 4 Including the conditions set by the Council of Ministers 5 Excludes Latin America Power Endesa GW bcm Installed CCGT capacity Gas contracts 2 32 5 16 8 25 9 60 10 21 8 40 2 6 5 21 0.6 23 1.6 2.8 9 23 3-4 26 5 12 6 8 26 15 1 ³ 1 60 Creation of the third largest utility in the world by number of clients ¹ |
 17 Main figures of the New Group Notes: 1 Latest available data 2 European operations (Spain, Italy, France) 3 Assuming share prices as of 2 September 2005, before announcement of the transaction, and including the present value of synergies, for illustrative purposes, of €2.7 billion (assuming a 7.5% discount rate) Clients (million)¹ 32 24 Endesa New Group pro-forma +33% CCGT installed capacity (GW)² 3-4 1.6 Endesa New Group pro-forma +88/150% Market value (€ billion)³ 29 20 Endesa New Group pro-forma +45% Investments 2006-2009 (€ billion) 17 11 Endesa New Group pro-forma +55% |
 18 Main figures of the New Group Notes: 1 Excluding LatAm and Endesa’s contract with Gas Natural 2 8 boats under contract and one of 138,000 m³ under construction Gas contracts (bcm) ¹ 26 3 Endesa New Group pro-forma +767% Endesa New Group pro-forma 34 27 Employees (000’s) +26% Methane tankers² Endesa New Group pro-forma 9 0 Integrated gas projects 2 0 Endesa New Group pro-forma |
 19 The New Group will be the main gas and electricity distributor in Spain Total: 5.6 million Total: 22.2 million Others New Group Source: CNE data (peninsular system) 1 Includes liberalised customers of distribution companies. Assumes the sale of 1.5 million customer connections 2 Considering the conditions set by the Council of Ministers Natural gas distribution (customer connections) 1,2 Electricity distribution (customer connections) ¹ Source: CNE data (peninsular system) 1 Considering the conditions set by the Council of Ministers The New Group maintains its previously announced plan to invest more than €17 billion, of which more than 60% will be allocated to the distribution and generation businesses in Spain New Group Disposals I NaturCorp Disposals II (0.25 million) (1.25 million) The New Group will have a market share close to 60% of gas distribution and 40% of electricity distribution |
 20 Introduction Remedy plan Conclusions Next steps Endesa in the current context |
 21 Endesa’s current share price is subject to strong speculation Endesa’s adjusted Net Income in 2005 … … results in an unjustifiably high multiple 1 Reflects accounting capital gain (not cash) from the sale of non-core assets (mainly Auna and Smartcom) for €1,341m and other adjustments (extraordinary tax benefit in Italy, extra-peninsular compensation for the 2001 - 2004 period and FX differences) 2 Not adjusted for tariff deficit 1 Prices as of 3 February 2006 2 Calculated based on the adjusted net income of €1,386 and Endesa’ s closing stock price as of 3 February 2006 of €24.89 3 Average of selected European utilities (E.ON, RWE, Enel, Scottish Power, Scottish&Southern, GDF), Source: IBES 3,182 1,386 (1,796) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Endesa 2005A Net Income Adjustments1 Endesa 2005A Adjusted Net Income2 19.0 15.4 Endesa implied P/E 20052 European utilities P/E3 2005 23% overvalued Accounting capital gain from Auna and Smartcom and other adjustments 04-05 Growth 154% 04-05 Growth 11% |
 22 An example Endesa’s accounting capital gains in the telecom business are actually economic losses €3,099m (€86)m Negative economic capital gain €1,469m €3,013m Actual cash loss Sale price² Investment 1997-2004¹ Reported accounting capital gain³ Notes: 1 As per Endesa’s 20-F (1997 to 2004). Includes the investments in Auna (€337m in 1997, €247m in 1999, €230m in 2000, €498m in 2001, €432m in 2002 and €261m in 2004) and Smartcom (€422m in 2000, €379m in 2001, €57m in 2002, €49m in 2003 and €187m in 2004) 2 Per Endesa’s filings with the CNMV 3 The total accumulated losses and amortisation of goodwill related to Auna in the period of 1997-2004was €620 million. The total accumulated losses and amortisation of goodwill related to Smartcom in the period of 2000-2004 was €463 million |
 23 The proposed transaction will help solve some of the current challenges faced by Endesa Financial Business/ Strategic Regulatory Generation market not competitive Tariff deficit Increase in tariffs Gas procurement Gas and power convergence Contradictory strategy Accounting, not economic capital gains (Auna and Smartcom) Non-recurring income Continuous change in accounting criteria The transaction helps to create a more integrated, balanced and global business Operating income Endesa’s operating cash flow decreased by 8% in 2005 Operating cash flow1 Growth 2004-2005 (%) Difference between EBIT and operating cash flow growth mainly attributable to tariff deficit recognition, extra-peninsular compensation and CTCs in Italy 49% -8% Source: Endesa’s 2005 results presentation page 2 and Endesa’s 2005 consolidated statement of cash flows 1 Net cash flow from operating activities |
 24 A new regulatory framework for the electricity sector is still pending and is becoming increasingly urgent in the current energy scenario 0 10 20 30 40 50 60 70 1Q 2003 2Q 2003 3Q 2003 4Q 2003 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 Pool Price Growth 03-05 (%) 113 25 32 41 3 Gas Domestic Coal Imported Coal 2005 Nuclear fuel Source: Endesa’s quarterly results, Bloomberg Pool prices have increased significantly more than fuel costs |
 25 The regulatory assumptions used by Endesa in their projections are hard to sustain Electric system costs in 2006 4 Tariff deficit 2005 ¹ €9,580m Tariff deficit 2006E €3,580m €6,000m ³ Total tariff deficit 2005-06E €18,858m €6,580m 35-51% of system costs Based on Endesa’s tariff deficit assumptions and January 2006 pool prices, tariff deficit could reach €6.0bn in 2006 To cover for the 2005 and 2006 tariff deficit, tariffs should increase in one year between 35% and 51% in a year, given that the likely €9.5bn tariff deficit would be equal to 51% of the annual electric system costs in Spain Notes: 1 Endesa has recognised a tariff deficit of €1,581m in 2005. However, the increase in fuel costs presented by the company in its results presentation on 18th January 2006 is only €222m 2 Endesa’s comment during the results presentation on 18th January 2006, based on an average pool price for 2006 of €55/KWh 3 Tariff deficit generated in 2006 using Endesa’s methodology, based on the average pool price during January 2006 4 According to the Government Tariff Report 2006 €3,000m ² The fullfilment of Endesa’s 2006 forecasted results of €2.4bn is based, as stated by the Company, on the recognition of a new sector tariff deficit between €2.0bn and €3.0bn in 2006 |
 26 Introduction Remedy plan Conclusions Next steps Endesa in the current context |
 27 Conditions of the offer Change in Endesa’s bylaws Minimum acceptance Approval of certain statutory modifications, in an Endesa Extraordinary General Meeting to be held during the acceptance period 10% voting limitation Modification of articles 37, 38 y 42 of the bylaws regarding the composition of Endesa’s Board and certain conditions to become a Director of Endesa A minimum of 75% of Endesa’s shares must be tendered Gas Natural capital increase Gas Natural’s EGM must approve the required capital increase Pending CNMV / SEC approval The offer is subject to the following conditions |
 28 Introduction Remedy plan Conclusions Next steps Endesa in the current context |
 29 Creating a leading, fully integrated global energy company Creates a leading world class integrated gas and power company, with a customer-oriented business model Addresses regulatory concerns, making the Spanish energy sector more competitive Strong and balanced positions in high growth markets Significant synergy potential |
 30 Investment commitment will allow for improvement in quality of service Synergies obtained in gas and power distribution passed on to gas and power customers Benefits of the transaction for the different stakeholders Customers Endesa shareholders Attractive offer with a mix of cash and shares of the New Group Opportunity to participate in a more balanced gas and power project Participation in the value of the synergies created Attractive dividend policy of the New Group Opportunity to become a part of an international, dynamic and solid business Possibility to participate in the growth of the new company Reinforcement of the current territorial structure Increases security of energy supply in Spain Improves the sector’s competitive situation in the country Gas Natural shareholders Creation of a leading, global integrated gas and power company, with strong energy management capabilities Attractive business mix and investment profile Solid financial structure of the New Group Significant synergy potential Gas Natural and Endesa employees Energy sector |
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