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.
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2
| Comunications Management |  | |
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This is a translation of a Spanish language press release.
In case of discrepancies, the Spanish version will prevail.
2006 Third Quarter Results
GAS NATURAL’S NET PROFIT ROSE 22.3% TO 646.9 MILLION EUROS |
| • | Ebitdafor the period rose 26.3% for a total of 1,415.6 million euros, reinforcing the path of growth which began in the first half of the year. |
| • | GAS NATURAL surpassed the figure of 10.5 million distribution customers, reflecting an increase of 532,000 supply points in the last 12 months. |
| • | Spain’s electricity activity (generation and supply) produced anebitdaof 203.8 million euros, which translates to an increase of 165.4%, owing to the boost in power generation and optimization of the customer portfolio. |
| • | The gas distribution activity in Italy strengthens its organic growth, with double-digit rates and anebitda exceeding 24.3% over the same period in 2005. |
GAS NATURAL’snet profit totaled 646.9 million euros in the period between January and September 2006, and grew 22.3% compared to the same period last year.
Net sales totaled 7,707.1 million euros in the first nine months of the year, representing a 33.3% rise with respect to the same period in 2005, due basically to increased business activity, and in particular, the electricity business in Spain, growth of gas supply driven by high natural gas prices and the spurt of activity in Latin America.
GAS NATURAL’sebitda in the first nine months was 1,415.6 million euros, and grew 26.3%, compared to the same period last year.
Distribution overall, which includes Spain, Latin America and Italy, accounted for 64.9% of GAS NATURAL’s totalebitda. Spain’s gas distribution was the largest gain, with 43.5% of the total.
Spain’s electricity activity continued its strong momentum, representing 14.4% of totalebitda for the Group, while upstream and midstream activities, principally in the Magreb-Europa gas pipeline operations and maritime transport, accounted for 9.8% of the total.
TheGroup’s net borrowings saw a reduction of 393.3 million euros, from December 31, 2005 to September 30, 2006, due to substantial cash flow, and totaled 3,221.9 million euros, with a net borrowing ratio of 34.9%.
GAS NATURAL’stotal investment during the first nine months of the year amounted to 766.8 million euros, a figure that is 29.6% lower than the figure reported for the same period last year, due basically to the acquisition of the Dersa (wind power) Group in April 2005.
Gas distribution in Spain
Ebitda from Spain’s gas distribution businessamounted to 615.6 million euros between January and September, 5.5% more than in the same period last year, and in line with the increase in regulated remuneration for fiscal year 2006. The gradual liberalization of the gas market is causing figures in this activity to be affected by the steady transition of residential customers to the liberalized market. 77% of customers remain with the Group’s supply companies.
Sales from the regulated gas business in Spain, which combines tariff gas distribution and supply, as well as third party network access services (TPA), totaled 193,467 GWh, up 4% from the prior year.
Tariff gas sales to residential customers fell 23.7% due to the gradual transition of customers to the liberalized market (both to GAS NATURAL supply companies as well as other suppliers), and to the different winter weather conditions compared to last year.
Tariff gas sales to industrial customers grew 61% compared to 2005, due basically to various medium consumption industrial customers who have reverted to the regulated market as a result of market prices.
Third party network access (TPA) servicesgrew by 8.5% and totaled 161,962 GWh, of which 74,112 GWh (+8.4%) related to services to third parties and the remaining 87,850 GWh (+8.6%), to GAS NATURAL, as the main operator in the liberalized gas market.
The distribution network was extended by 2,401 kilometers in the last 12 months, and, at September 30, 2006, totaled 41,547 kilometers, which reflects a 6.1% year-on-year increase. Between January and September 2006, GAS NATURAL began supplying 28 new municipalities, and currently supplies gas to 842 cities.
At September 30, 2006, thenumber of gas customers in Spain was 5,343,000, a 6.2% increase, with a year-on-year increase of 310,000 customers.
Gas distribution in Latin America
Ebitda for gas distribution in Latin America totaled 279.7 million euros between January and September 2006, representing an increase of 27.2% and 59.8 million euros in absolute terms. This growth is due mainly to improved operating results in all countries.
Gas sales in Latin America, which combines gas sales and third party network access services (TPA), amounted to 126,611 GWh, an increase of 3.8% from the prior year. By country, Colombia and Brazil were notable gainers, with 19.6% and 6.9%, respectively.
Thedistribution network grew by 1,927 kilometers in the last 12 months, and totaled 57,795 kilometers at September 30, 2006, reflecting a year-on-year increase of 3.4%.
Gas customer volume in Latin America totaled 4,879,000 at September 30, 2006, with a year-on-year increase of 189,000 customers.
Principal physical aggregates by country
| Argentina | Brazil | Colombia | Mexico | Total | ||||||
Gas sales (GWh): | 51,224 | 33,128 | 9,785 | 32,474 | 126,611 | |||||
Increase vs. 9M05 (%) | -1.7 | 6.9 | 19.6 | 5.7 | 3.8 | |||||
Distribution network (Km at 9/30) | 21,464 | 5,307 | 15,877 | 15,147 | 57,795 | |||||
Increase vs. 9/30/05 (Km) | 303 | 584 | 701 | 339 | 1.927 | |||||
Distribution customers, in thousands (at 9/30) | 1.314 | 755 | 1.693 | 1.117 | 4.879 | |||||
Increase vs. 9/30/05, in thousands | 32 | 30 | 113 | 14 | 189 | |||||
Argentina consolidated its commercial revitalization with a fresh increase in the number of customers and 6.6% in sales to residential customers.
InBrazil, sales continued to grow, as in previous years, at an interannual rate of close to 10%. By sector, automation was the most active, with a 21.4% boost. Sales in the industrial market rose by 4.9%, and Sao Paulo and Rio de Janeiro were noteworthy gainers with 16.7% and 8.2%, respectively. Theebitda for Brazilian activity rose 44.1% to 116.7 million euros.
Colombia holds on to its vigorous growth, with double digit rates in all markets. Sales rose 19.6% and, by market, vehicular natural gas sales took off with a 43.5% rise. Between January and September 2006, 21,513 vehicles were converted, 92% more than in 2005.
Mexicoboosted its gas sales by 5.7%, a figure that reflects the negative impact of the rising cost of gas, which is referenced to prices in Southern United States. The federal government has implemented measures to mitigate this effect, such as offering subsidies to certain residential customers, which have reduced invoice cost up to 28%.
Gas distribution in Italy
Ebitda from Italian gas distribution was 23 million euros, up 24.3% from 2005, strengthening GAS NATURAL’s activity in that country.
Gas sales in Italy were 1,792 GWh, 7% less than in 2005, due, basically, to less than ideal weather conditions.
Commercial activity is gaining strength in 2006, with year-on-year growth of 32,000 new distribution customers and vigorous activity in the regions of Palermo, Catania and Reggio Calabria.
At September 30, 2006, the company had307,000 gas distribution customers,an 11.6% increase, and adistribution network in Italy of 3,927 kilometers, which translates to a 5.9% year-on-year increase.
Electricity in Spain
Ebitda from Spain’s electricity business during the first nine months of the year was 203.8 million euros, more than double the figure from the same period last year. Electricity generation continued to be positive due to increased pool prices, with an average cumulative figure of 57.24 €/MWh in the first nine months of 2006.
Power generated and sold, principally to the wholesale market, between January and September 2006, totaled 14,294 GWh, an increase of 113% over 2005. This rise is due to the normalized production of the Cartagena plant, with 1,000 MW of installed capacity, which began commercial operation in the first quarter, and in an environment of favorable pool prices.
Combined cycle plants generated 13,707 GWh of electricity during the first nine months of the year.
GAS NATURAL’s cumulative sharein ordinary electricity generation totaled 8.5% in the first quarter.
Electricity sales in the liberalized market continues to suffer from high pool prices. Electricity supply still has to compete with the regulated tariff, which is
well below market prices, so that it takes on losses when the market cost exceeds the tariff. Consequently, many supply companies are streamlining their customer portfolio in the liberalized market.
To this end,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 supply, from 3,944 GWh/year in 2005 to 465 GWh/year in 2006.Electricity supply to industrial customersfell 78.3% with respect to the same period last year.
Electricity sales to residential customers, despite the fact that annual cumulative sales rose 11.1%, were down by 18.3% in the third quarter. At September 30,the portfolio of residential customers was 383,000 contracts, representing a decrease of 92,000 contracts in the last 12 months.
Electricity in Puerto Rico
Ebitda from activities in Puerto Rico totaled 47.3 million euros (58.8 million dollars in local currency), a 6.3% increase over the same period last year.
EcoEléctrica generated 2,457 GWh of electricity (1,229 GWh attributable to GAS NATURAL), an increase of 7.9% over the same period last year, and with a load factor of 73%, higher than the 68.8% recorded in 2005.
Gas supply: upstream +midstream
Ebitda from upstream and midstream gas supply amounted to 138.9 million euros, 11.1% more than in the same period in 2005, due basically to a larger financial contribution from EMPL, despite a slight reduction in the volume transported, greater utilization of the tanker fleet (97%, vs. 76% in 2005), and the dollar’s appreciation.
The gas transportation activity conducted in Morocco, through companies EMPL and Metragaz, represented a total volume of 99,381 GWh, an 8.9% decline from 2005. Of that figure, 76,202 GWh were transported for GAS NATURAL through the Sagane company, and 23,179 GWh for Portugal and Morocco.
Wholesale and retail gas supply
Ebitdafrom wholesale and retail gas supply was 93 million euros, compared to 38.1 million from the same period last year.Ebitdacontinued the positive trend that commenced in mid-2005, as a result of measures adopted to favour liberalization, the recognition of raw material costs, convergence towards international prices, plus the commercial policy applied by GAS NATURAL.
A total of 221,496 GWh of natural gas was supplied by GAS NATURAL, of which 188,767 GWh were earmarked for the Spanish market and the other 32,729 GWh (10.4% more) were sold in other countries.
Wholesale gas supplies for the regulated market (sold to Enagás which, in addition to inventory management, supplies gas to distribution companies, both those in the GAS NATURAL group and to third parties) totaled 41,838 GWh, a 5.5% drop, due to greater market opening despite certain mid-sized industrial customers reverting to the regulated market.
Sales to the liberalized market amounted to 149,929 GWh, a 1.1% increase over the same period last year. Of those sales, 122,087 GWh, a 9.5% increase, went to end customers of GAS NATURAL, mainly in the industrial market, as well as to CCGTs and households. Supply to the liberalized market by other gas suppliers amounted to 24,842 GWh, a 26.7% decline from 2005.
Supply of gas to foreign markets surged dramatically in the third quarter of 2006, with a 49.7% increase, owing to certain timely and non-recurrent supply transactions and bigger sales by GAS NATURAL in France.
From January to September 2006, GAS NATURAL added more than 113,800maintenance contracts in connection with its multiproduct business, so that, at September 30, 2006, current contracts amounted to 1,538,700 .
At September 30, 2006, GAS NATURAL had 204 franchised centers and one which it owned, plus 687 associated centers, representinga unique and powerful commercial network in Spain.
Product and service agreements in addition to gas sales, including financial services and electricity sales, were approximately 2,268,000 at September 30, 2006, a 4% increase over the same period last year, which puts the ratio of contracts per customer in Spain at 1:46.
Moreover, GAS NATURAL’s commercial activity helped push the number ofhomes heated with gasto more than 27,100 and 35,300 inappliance sales, including more than 8,800 air conditioning facilities.
November 7, 2006.
Main physical aggregates
| 3Q06 | 3Q05 | % | 9M06 | 9M05 | % | |||||||||
| 99,280 | 95,488 | 4.0 | Distribution (GWh): | 321,870 | 309,945 | 3.8 | ||||||||
| 55,342 | 53,478 | 3.5 | Spain: | 193,467 | 186,046 | 4.0 | ||||||||
| 4,903 | 7,801 | -37.1 | Tariff gas sales | 31,505 | 36,834 | -14.5 | ||||||||
| 50,439 | 45,677 | 10.4 | TPA | 161,962 | 149,212 | 8.5 | ||||||||
| 43,751 | 41,817 | 4.6 | Latin America: | 126,611 | 121,972 | 3.8 | ||||||||
| 28,402 | 28,349 | 0.2 | Tariff gas sales | 77,759 | 74,218 | 4.8 | ||||||||
| 15,349 | 13,468 | 14.0 | TPA | 48,853 | 47,754 | 2.3 | ||||||||
| 187 | 193 | -3.1 | Italy: | 1,792 | 1,927 | -7.0 | ||||||||
| 169 | 182 | -7.1 | Tariff gas sales | 1,720 | 1,867 | -7.9 | ||||||||
| 18 | 11 | 63.6 | TPA | 72 | 60 | 20.0 | ||||||||
| 889 | 1,086 | 20.8 | Gas distribution network (Km): | 103,269 | 98,723 | 4.6 | ||||||||
| 471 | 620 | -24.0 | Spain | 41,547 | 39,146 | 6.1 | ||||||||
| 381 | 370 | 3.0 | Latin America | 57,795 | 55,868 | 3.4 | ||||||||
| 47 | 96 | -51.0 | Italy | 3,927 | 3,709 | 5.9 | ||||||||
| 112 | 149 | -24.8 | Increase in gas distribution connections (in thousands) | 354 | 433 | -18.2 | ||||||||
| 69 | 73 | -5.5 | Spain | 209 | 225 | -7.1 | ||||||||
| 36 | 65 | -44.6 | Latin America | 122 | 185 | -34.1 | ||||||||
| 7 | 11 | -36.4 | Italy | 23 | 23 | — | ||||||||
| — | — | — | Gas distribution connections, in thousands (at 9/30): | 10,530 | 9,998 | 5.3 | ||||||||
| — | — | — | Spain | 5,343 | 5,033 | 6.2 | ||||||||
| — | — | — | Latin America | 4,880 | 4,690 | 4.1 | ||||||||
| — | — | — | Italy | 307 | 275 | 11.6 | ||||||||
| 63,809 | 62,451 | 2.2 | Gas supply (GWh): | 221,496 | 219,325 | 1.0 | ||||||||
| 53,439 | 55,524 | -3.8 | Spain | 188,767 | 189,687 | -0.5 | ||||||||
| 10,370 | 6,927 | 49.7 | International | 32,729 | 29,638 | 10.4 | ||||||||
| 30,780 | 35,650 | -13.7 | Gas transportation – EMPL (GWh) | 99,381 | 109,085 | -8.9 | ||||||||
| — | — | — | Contracts per customer in Spain (at 9/30) | 1,46 | 1,46 | — | ||||||||
| 5,033 | 3,067 | 64.1 | Electricity generated (GWh): | 15,523 | 7,851 | 97.7 | ||||||||
| 4,604 | 2,655 | 73.4 | Spain | 14,294 | 6,712 | — | ||||||||
| 429 | 412 | 4.1 | Puerto Rico | 1,229 | 1,139 | 7.9 | ||||||||
| 42 | — | — | Installed capacity (MW): | 3,440 | 2,173 | 58.3 | ||||||||
| 42 | — | — | Spain | 3,169 | 1,902 | 66.6 | ||||||||
| — | — | — | Puerto Rico | 271 | 271 | — | ||||||||
| — | — | — | Employees1 (at 9/30) | 6,717 | 6,788 | -1.0 |
| 1 | Includes the entire group companies under cooperative management (Stream and EcoEléctrica) |
Consolidated Profit and Loss Account
(unaudited)
(€ millions) | 9M06 | 9M05 | ||
Net sales | 7,707.1 | 5,782.5 | ||
Other revenues | 62.6 | 60.0 | ||
Purchases | -5,583.0 | -4,017.2 | ||
Personnel costs, net | -204.7 | -187.5 | ||
Other costs | -566.4 | -517.0 | ||
EBITDA | 1,415.6 | 1,120.8 | ||
Amortization allowance | -437.2 | -378.3 | ||
Transfer to reserves | -38.0 | -20.4 | ||
OPERATING INCOME | 940.4 | 722.1 | ||
Financial results, net | -202.6 | -165.7 | ||
Net loss from assets deterioration | — | -0.4 | ||
Equity income | 4.1 | 33.0 | ||
Gains on disposal of non-current assets | 223.8 | 215.8 | ||
PRE-TAX PROFIT | 965.7 | 804.8 | ||
Corporate income tax | -264.9 | -223.5 | ||
Minority interest | -53.9 | -52.4 | ||
PROFIT ATTRIBUTABLE TO THE GROUP | 646.9 | 528.9 | ||
Consolidated Balance Sheet
(unaudited)
(€ millions) | 09/30/06 | 09/30/05 | ||
Non-Current Assets- | 10,378.6 | 9,819.2 | ||
Tangible assets | 7,882.7 | 7,298.6 | ||
Goodwill | 444.0 | 452.1 | ||
Other intangible assets | 1,218.4 | 1,281.9 | ||
Investment in associated companies | 33.0 | 204.8 | ||
Other non-current assets | 800.5 | 581.8 | ||
Current Assets- | 2,692.4 | 2,491.8 | ||
Inventory | 484.9 | 430.0 | ||
Debtors and other accounts receivable | 1,831.7 | 1,609.8 | ||
Other current assets | 142.6 | 161.1 | ||
Cash and cash equivalent | 233.2 | 290.9 | ||
TOTAL ASSETS | 13,071.0 | 12,311.0 | ||
(unaudited)
(€ millions) | 09/30/06 | 09/30/05 | ||
Shareholders’ Equity- | 6,011.2 | 5,344.0 | ||
Equity of Parent Company | 5,653.0 | 5,069.9 | ||
Minority interest | 358.2 | 274.1 | ||
Non-Current Liabilities- | 4,772.9 | 4,657.2 | ||
Non-current financial debt | 2,941.9 | 3,000.0 | ||
Provisions | 414.6 | 344.1 | ||
Other non-current liabilities | 1,416.4 | 1,313.1 | ||
Current Liabilities | 2,286.9 | 2,309.8 | ||
Current financial debt | 513.2 | 535.9 | ||
Suppliers and other current liabilities | 1,773.7 | 1,773.9 | ||
TOTAL LIABILITIES | 13,071.0 | 12,311.0 | ||