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.: 005-80961
In connection with the offer by Gas Natural SDG, S.A. (Gas Natural) to acquire 100% of the share capital of Endesa, S.A. (Endesa), Gas Natural has filed with the United States Securities and Exchange Commission (SEC) a registration statement on Form F-4 (File No.: 333-132076), which includes a prospectus and related exchange offer materials to register the Gas Natural ordinary shares (including Gas Natural ordinary shares represented by Gas Natural American Depositary Shares (ADSs)) to be issued in exchange for Endesa ordinary shares held by U.S. persons and for Endesa ADSs held by holders wherever located. In addition, Gas Natural has filed a Statement on Schedule TO with the SEC in respect of the exchange offer. INVESTORS AND HOLDERS OF ENDESA SECURITIES ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROSPECTUS, THE STATEMENT ON SCHEDULE TO, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS AND SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain free copies of the registration statement, the prospectus and related exchange offer materials and the Statement on Schedule TO, as well as other relevant documents filed with the SEC, at the SEC’s website at www.sec.gov. The prospectus and other transaction-related documents are being mailed to holders of Endesa securities eligible to participate in the U.S. offer and additional copies may be obtained for free from Georgeson Shareholder Communications, Inc., the information agent: 17 State Street, 10th Floor, New York, New York 10004, Toll Free (888) 206-0860, Banks and Brokers (212) 440-9800.
This communication is not an offering document and does not constitute an offer to sell or the solicitation of an offer to buy securities or a solicitation of any vote or approval, nor shall there be any sale or exchange of securities in any jurisdiction in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The solicitation of offers to buy Gas Natural ordinary shares (including Gas Natural ordinary shares represented by Gas Natural ADSs) in the United States will only be made pursuant to a prospectus and related offering materials that will be mailed to holders of Endesa ADSs and U.S. holders of Endesa ordinary shares. Investors in ordinary shares of Endesa should not subscribe for any Gas Natural ordinary shares to be issued in the offer to be made by Gas Natural in Spain except on the basis of the final approved and published offer document in Spain that will contain information equivalent to that of a prospectus pursuant to Directive 2003/71/EC and Regulation (EC) No. 809/2004.
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.
* * *
2
Comunications Management |  |
This is a translation of a Spanish language press release.
In case of discrepancies, the Spanish version will prevail.
2006 Second Quarter Results
GAS NATURAL’S NET PROFIT GREW BY 23.9%
TO 455.8 MILLION EUROS
| • | Ebitdarose 28.5% to 934.4 million euros, reinforcing the path of growth which began in the first quarter. |
| • | The electricity business in Spain, the growing contribution from gas supply, and gas distribution in Latin America were the chief growth engines for GAS NATURAL. |
| • | For the first time, in Spain, the company generated 9,690 GWh of electricity in six months, a 138.9% increase, for a total power generation share of 8.8%. |
| • | The gas distribution activity in Latin America continues its strong momentum and reported a 30.6% increase inebitda of up to 179.4 million euros. |
| • | GAS NATURAL increased the number of gas distribution customers to 10.4 million, reflecting an increase of 569,000 customers in the past year. |
GAS NATURAL’snet profit totaled 455.8 million euros at the end of the second quarter of 2006, and rose 23.9% in relation to the same period last year.
Net business volume totaled 5,422.2 million euros between January and June, reflecting a 43.1% growth with respect to the same period in 2005, due basically to business activity, and in particular, the electricity business in Spain, the growth in gas supply due to higher gas prices, and the business momentum in Latin America.
GAS NATURAL’sebitda in the first half of the year was 934.4 million euros, rising 28.5% compared to the prior year.
Gas distribution activity overall, including Spain, Latin America and Italy, represented 65.8% of totalebitda for GAS NATURAL. In this case, Spain was the biggest contributor, with 44.5% of the total.
The electricity business in Spain continued its strong momentum, representing 14% of the Group’s totalebitda, while upstream and midstream activities, which mainly include the Magreb-Europa gas pipeline operation, together represented a totalebitda of 10.4%.
The Group’s net borrowings fell by 576.3 million euros between December 31, 2005 and June 30, 2006, owing to the significant cash flow generated in connection with a lower investment, which placed it at 3,038.9 million euros, with a borrowing ratio of 34.3%.
GAS NATURAL’sinvestmentsduring the first half of the year totaled 535.8 million euros.
Distribution in Spain
Ebitdawith respect to the gas distribution business in Spain was 415.2 million euros, 6.2% more than in the first half of the prior year, and in line with the increase in regulated remuneration for 2006. The financial aggregates of this activity were affected by the steady transition by residential customers to the liberalized market. 78% of the customers remained with the Group’s own supply company.
Regulated gas sales in Spain, which encompass tariff gas distribution and marketing and third party network access services (TPA), amounted to 138,125 GWh, up 4.2% from the prior year.
Third party network access services (TPA)grew by 7.7% totaling 111,523 GWh, of which 49,990 GWh (+7.8%) related to services provided to third parties and the remaining 61,533 GWh (+7.7%) to GAS NATURAL, as the main operator also in the liberalized gas market.
Thedistribution network was extended by 2,550 kilometers in the last 12 months to 41,076 kilometers at June 30, 2006, reflecting a year-on-year increase of 6.6%. During the first half of 2006, GAS NATURAL began supplying 17 municipalities. It currently supplies gas in 831 cities and expects to expand the grid to more than 50 new cities in 2006.
At June 30, 2006, the number of gas distribution customers in Spain was 5,274,000, a 6.3% increase, with a year-on-year increase of 314,000 customers.
Distribution in Latin America
Ebitdawith respect to gas distribution in Latin America (Argentina, Brazil, Colombia and Mexico) was 179.4 million euros, an increase of 30.6% over the prior year, due mainly to stronger operating results in all countries, as well as local currency appreciation.
Gas sales in Latin America, which include sales of gas and third party network access services (TPA), totaled 82,860 GWh, a 3.4% increase over the first half of 2005. By country, Colombia and Brazil had noteworthy increases, 17.9% and 9.6%, respectively.
Thedistribution network expanded by 1,916 kilometers in the last 12 months, totaling 57,414 kilometers at June 30, 2006, reflecting a year-on-year growth of 3.5%.
At June 30, 2006, gas distribution customer volume in Latin America totaled 4,844,000, with a year-on-year growth of 219,000 distribution customers.
Main physical aggregates by country
| Argentina | Brazil | Colombia | Mexico | Total | ||||||
Gas sales (GWh) | 33,517 | 21,636 | 6,259 | 21,448 | 82,860 | |||||
Change vs. 1H05 (%) | -3.2 | 9.6 | 17.9 | 4.7 | 3.4 | |||||
Distribution network (Km at 6/30/06) | 21,395 | 5,231 | 15,694 | 15,094 | 57,414 | |||||
Change vs. 6/30/2005 (Km) | 317 | 446 | 727 | 426 | 1,916 | |||||
Distribution customers, in thousands (at 6/30/06) | 1,305 | 757 | 1,667 | 1,115 | 4,844 | |||||
Change vs. 6/30/05, in thousands | 32 | 48 | 117 | 22 | 219 | |||||
Argentina strengthened its business revival with a fresh upswing in the number of customers and a 3.5% growth in sales, highlighted by a 9.4% increase in residential sales. TPA sales to large users declined due to lower demand from other distributors, but this did not significantly affect the margin.
InBrazil, sales continued to grow at a rate of close to 10% year-on-year, in line with the trend in 2004 and 2005. By sector, there were notable increases of 22.2% in sales for automotion and 10.6% in industrial sales, despite the uncertainty created by the nationalization of gas in Bolivia.
Colombiakept up its pace of energetic growth, with double-digit rates in all markets. Sales grew by 17.9% and the number of distribution customers climbed in the last 12 months, to more than 117,000 for a total of 1,667,000. By market, the vehicular natural gas market is singled out with 42.6% growth. During the first half of 2006, 11,700 vehicles were converted, 57.3% more than in the same period last year.
México expanded its gas sales by 4.7%, a figure that acknowledges the negative impact of the higher cost of gas, which is referenced to prices in southern United States. The Federal Government is implementing measures that may reduce gas bills by 28%.
Distribution in Italy
Ebitda for gas distribution in Italy was 20.3 million euros, a 13.4% increase over the prior year.
Thegas distribution business totaled 1,605 GWh, a decline of 7.4% as opposed to 2005, due, basically, to less than favorable climate conditions.
Commercial activity is firming up in 2006, with a year-on-year growth of 36,000 new distribution customers and brisk activity in the regions of Palermo, Catania and Reggio Calabria. The company expects to surpass this figure and reach close to 40,000 new distribution customers in 2006. GAS NATURAL reached300,000 gas distribution customers in Italy in the first half of the year.
Electricity in Spain
Ebitdafrom the electricity business in Spain was 130.9 million euros in the first six months, which more than triples the figure from the prior year. The power generation business continued to benefit by high pool prices, with a cumulative average of 59.66 €/MWh between January and June.
The business of electricity supply in the liberalized market continues to suffer by having to compete with the regulated tariff, which is far removed from market prices, driven up by rising fuel costs, low precipitation and the impact of CO2emission permit prices.
Energy produced and sold mainly to the wholesale market was 9,690 GWh in the first half of the year, more than doubling the figure for the same period last year. Between April and June 2006, this figure was 5,498 GWh, 143% higher than last year, due to normalized production by the Cartagena plant (1,200 MW), which has been fully operational since the first quarter of the year.
Combined cycle plants generated9,284 GWhof electricityduring the first half of 2006, which is 2.4 times the production from the same period last year. During
the second quarter of this year, combined cycle production was 5,316 GWh, considerably more than the amount of electricity sold in the supply business.
GAS NATURAL’s cumulative electricity share of the “ordinary regime” power generation market was 8.8% in the first half of 2006.
The business of electricity supply in the liberalized market continued to be penalized by high prices in the second quarter. The supply business still competes with the considerably lower regulated tariff. Consequently, many supply companies are streamlining their customer portfolio in the liberalized market.
Thus, GAS NATURAL’s portfolio of electricity contracts with industrial customers continued the trend observed in the second half of 2005, and, in the last 12 months, it has greatly reduced the amount of contracted electricity, from 4,433 GWh/year in the first half of 2005, to 565 GWh/year in 2006, and the number of customers, from 2,003 GWh/year to 271 GWh/year.
This reduction in the portfolio of electricity contracts was also felt in the residential market, with a slight decrease.
Electricity supply to industrial customers fell 75.1% with respect to the same period last year. On the other hand, electricity sales to residential customers were practically constant in the second quarter of 2006, commensurate with the portfolio of residential customers of about 440,000 contracts.
GAS NATURAL has 2,800 MW of operational combined cycle power production capacity, another 1,200 MW under construction (Plana del Vent and Malaga) and more than 800 MW at an advanced stage of permit obtainment, all in line with the objective of having 4,800 MW of combined cycle power generation by 2008.
Electricity in Puerto Rico
Ebitda for activities in Puerto Rico totaled 30.6 million euros (37.5 million dollars, local currency), up 8.5% from the first half of last year.
EcoEléctrica generated 1,600 GWh net (the power attributable to GAS NATURAL was 800 GWh), with a load factor of 73%, similar to that reported in the same period last year.
Gas Supply:Upstream + midstream
Ebitdain theupstream and midstream gas supply business was 96.8 million euros, 16.2% more than in the first half of 2005, due basically to a larger financial contribution from EMPL, despite a slight reduction in the volumes transported; greater utilization of the tanker fleet during the quarter (97% vs. 78% in the first half of 2005), and the dollar’s appreciation.
The gas transportation activity conducted in Morocco, through companies EMPL and Metragaz, represented a total volume of 68,601 GWh, a 6.6% decline from the same period in 2005. Of total volume, 52,652 GWh were transported for GAS NATURAL, through Sagane, and 15,949 GWh for Portugal and Morocco.
Gas Supply: Wholesale and Retail
Ebitdafrom upstream and midstream gas supplywas 54 million euros in the first half of 2006, compared with 24.4 million euros in the same period last year.Ebitda from this activity continues the positive trend that began in mid-2005, due to measures adopted to favor liberalization and the recognition of raw material costs, the convergence towards international prices, plus the commercial policy applied by GAS NATURAL.
GAS NATURAL’s total supply was 157,687 GWh, of which 135,328 GWh was earmarked for the Spanish market and the other 22,359 GWh for international markets.
The supply of gas to the regulated market (supply to Enagás which, in addition to inventory management, supplies the gas to distribution companies, both those in the GAS NATURAL group as well as third parties) totaled 34,228 GWh, a 3.9%
drop, due to greater market opening despite certain mid-sized customers reverting to the regulated market.
Sales in the liberalized market amounted to 101,100 GWh, a 2.6% increase from the first half of 2005. Of those sales, 84,029 GWh, 11% more, were supplied to end customers by GAS NATURAL, and were earmarked mainly for the industrial market, as well as for combined cycle power supply (CCGTs) to the residential market. Supply to the liberalized market by other supply companies totaled 17,071 GWh.
Despite a sharp spike in gas supply in Europe, which grew by 15.9% vis-à-vis the first half of 2005,international gas procurements declined by 1.5% as a whole, due to lower sales to the United States and less frequency than in the first half of 2005.
With respect to GAS NATURAL’s multi-product activity, close to 116,200gas maintenance contracts were added in the first half of 2006, making a total of 1,541,100 contracts in force at June 30, 2006.
Product and services contracts other than for gas sales, including financial services and the sale of electricity, were close to 2,325,000 at June 30, 2006, an 11.9% increase over contracts in force at June 30, 2005, representing a ratio of 1.48 contracts per customer in Spain.
In addition, GAS NATURAL’s marketing efforts helped increase the number ofhomes heated by gas by 12,800 andappliance sales by 22,000, which include more than 4,400 air conditioning installations.
Barcelona, July 26, 2006.
Main physical aggregates
| 2Q06 | 2Q05 | % | 1H06 | 1H05 | % | |||||||
| 100,141 | 99,178 | 1.0 | Distribution (GWh): | 222,590 | 214,457 | 3.8 | ||||||
| 60,363 | 58,196 | 3.7 | Spain: | 138,125 | 132,568 | 4.2 | ||||||
| 8,336 | 9,093 | -8.3 | Tariff gas sales | 26,602 | 29,033 | -8.4 | ||||||
| 52,027 | 49,103 | 6.0 | TPA | 111,523 | 103,535 | 7.7 | ||||||
| 39,636 | 40,575 | -2.3 | Latin America: | 82,860 | 80,155 | 3.4 | ||||||
| 24,862 | 24,474 | 1.6 | Tariff gas sales | 49,357 | 45,869 | 7.6 | ||||||
| 14,774 | 16,101 | -8.2 | TPA | 33,503 | 34,286 | -2.3 | ||||||
| 142 | 407 | -65.1 | Italy: | 1,605 | 1,734 | -7.4 | ||||||
| 121 | 384 | -68.5 | Tariff gas sales | 1,551 | 1,685 | -8.0 | ||||||
| 21 | 23 | -8.7 | TPA | 54 | 49 | 10.2 | ||||||
| 1,258 | 1,634 | -23.0 | Distribution network (km): | 102,370 | 97,637 | 4.8 | ||||||
| 761 | 687 | 10.8 | Spain | 41,076 | 38,526 | 6.6 | ||||||
| 437 | 897 | -51.3 | Latin America | 57,414 | 55,498 | 3.5 | ||||||
| 60 | 50 | 20.0 | Italy | 3,880 | 3,613 | 7.4 | ||||||
| 129 | 154 | -16.2 | Increase in gas distribution connections, (‘000) | 242 | 284 | -14.8 | ||||||
| 78 | 85 | -8.2 | Spain | 140 | 152 | -7.9 | ||||||
| 42 | 62 | -32.3 | Latin America | 86 | 120 | -28.3 | ||||||
| 9 | 7 | 28.6 | Italy | 16 | 12 | 33.3 | ||||||
| — | — | — | Gas distribution connections, (‘000) (at 30/06): | 10,418 | 9,849 | 5.8 | ||||||
| — | — | — | Spain | 5,274 | 4,960 | 6.3 | ||||||
| — | — | — | Latin America | 4,844 | 4,625 | 4.7 | ||||||
| — | — | — | Italy | 300 | 264 | 13.6 | ||||||
| 67,968 | 67,600 | 0.5 | Gas supply (GWh): | 157,687 | 156,874 | 0.5 | ||||||
| 58,351 | 58,244 | 0.2 | Spain | 135,328 | 134,163 | 0.9 | ||||||
| 9,617 | 9,356 | 2.8 | International | 22,359 | 22,711 | -1.5 | ||||||
| 33,673 | 36,880 | -8.7 | Gas transportation - EMPL (GWh) | 68,601 | 73,435 | -6.6 | ||||||
| — | — | — | Contracts per customer in Spain (at 30/06) | 1,48 | 1,45 | 2.1 | ||||||
| 5,969 | 2,655 | — | Electricity generated (GWh): | 10,490 | 4,784 | — | ||||||
| 5,498 | 2,260 | — | Spain | 9,690 | 4,057 | — | ||||||
| 471 | 395 | 19.2 | Puerto Rico | 800 | 727 | 10.0 | ||||||
| 9 | 228 | -96.1 | Installed capacity (MW): | 3,398 | 2,173 | 56.4 | ||||||
| 9 | 228 | -96.1 | Spain | 3,127 | 1,902 | 64.4 | ||||||
| — | — | — | Puerto Rico | 271 | 271 | — | ||||||
| — | — | — | Employees (at 30/06) | 6,698 | 6,807 | -1.6 | ||||||
Consolidated Profit and Loss Account
(unaudited)
(€ Mn) | 1S06 | 1S05 | ||
Net sales | 5,422.2 | 3,788.2 | ||
Other revenues | 53.9 | 38.6 | ||
Purchases | -4,022.1 | -2,634.7 | ||
Personnel costs, net | -137.1 | -120.1 | ||
Other costs | -382.5 | -345.0 | ||
EBITDA | 934.4 | 727.0 | ||
Depreciation and amortization of fixed assets | -290.8 | -245.2 | ||
Change in operating provisions | -27.3 | -10.5 | ||
OPERATING INCOME | 616.3 | 471.3 | ||
Financial results, net | -137.1 | -101.7 | ||
Net loss from assets deterioration | — | -0.5 | ||
Equity income | 3.0 | 23.51 | ||
Gains on disposal on non current assets | 180.2 | 162.1 | ||
CONSOLIDATED PRE-TAX PROFIT | 662.4 | 554.7 | ||
Corporate income tax | -176.1 | -153.9 | ||
Minority interest | -30.5 | -33.0 | ||
PROFIT ATTRIBUTABLE TO THE GROUP | 455.8 | 367.8 | ||
Consolidated Balance Sheet
(unaudited)
(€ Mn) | 06/30/06 | 06/30/05 | ||
Non-Current Assets- | 10,267.7 | 9,693.4 | ||
Tangible assets | 7,709.3 | 7,140.7 | ||
Goodwill | 455.9 | 456.3 | ||
Other intangible assets | 1,285.1 | 1,294.9 | ||
Investment in associated companies | 34.4 | 223.1 | ||
Other non-current assets | 783.0 | 578.4 | ||
Current Assets- | 2,894.4 | 2,414.0 | ||
Inventories | 429.5 | 283.0 | ||
Debtors and other accounts receivable | 1,978.8 | 1,689.0 | ||
Other current assets | 185.3 | 165.7 | ||
Cash and cash equivalent | 300.8 | 276.3 | ||
TOTAL ASSETS | 13,162.1 | 12,107.4 | ||
(unaudited)
(€ Mn) | 06/30/06 | 06/30/05 | ||
Shareholders’ Equity- | 5,810.9 | 5,166.4 | ||
Equity of Parent Company | 5,480.3 | 4,894.1 | ||
Minority interest | 330.6 | 272.3 | ||
Non-Current Liabilities- | 4,701.2 | 4,453.0 | ||
Non-current financial debt | 2,938.6 | 2,844.1 | ||
Provisions | 384.2 | 301.8 | ||
Other non-current liabilities | 1,378.4 | 1,307.1 | ||
Current Liabilities- | 2,650.0 | 2,488.0 | ||
Current financial debt | 401.1 | 436.9 | ||
Accounts payable and other current liabilities | 2,248.9 | 2,051.1 | ||
TOTAL LIABILITIES | 13,162.1 | 12,107.4 | ||