FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of May, 2005
Commission File Number: 333-07654
ENDESA, S.A.
(Translation of Registrant's Name into English)
Ribera del Loira, 60
28042 Madrid, Spain
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F:
Form 20-F X Form 40-F
----- -----
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes No X
----- -----
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes No X
----- -----
Indicate by check mark whether by furnishing the information
contained in this Form, the Registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934:
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A
-----
================================================================================
ENDESA Raised Net Income 27% in the First
Quarter of 2005 to Euro 560 Million
NEW YORK--(BUSINESS WIRE)--May 11, 2005--ENDESA (NYSE:ELE)
-- Strong net income growth in Europe (+93.2%) and Latin America
(+35.9%).
-- Total contribution from these two business accounts for 33.2%
of the total net income of the Company.
-- Double-digit growth in electricity output (+13.2%) and sales
of electricity (+19.4%).
-- ENDESA sustained its position as Spain's leading electricity
company with market shares in output and sales to final
customers of 37% and 39.2%, respectively.
-- It's balanced generation mix allowed to offset the impact of
lower hydro output and high Spanish power prices with unit
fuel costs around 20% below the estimated for the rest of
sector.
-- The company has begun the orderly disposal of its Auna stake.
KEY FIGURES AND HIGHLIGHTS IN THE FIRST QUARTER OF 2005
NET INCOME GROWTH IN ALL ELECTRICITY BUSINESSES
-- Spain and Portugal: Euro 380 million, an increase of 21%.
-- ENDESA Europe: Euro 114 million, an increase of 93.2%.
-- ENDESA Latin America: Euro 72 million, an increase of 35.9%.
-- Net income reflects the recovery of the amounts paid out to
finance the tariff deficit in Spain generated during the
quarter. Stripping out this effect, total net income would
have been Euro 379 million, 14.1% lower than in the first
quarter of 2004.
SIGNIFICANT RISE IN MAIN INCOME STATEMENT LINES
-- Gross margin: Euro 2,155 million, an increase of 10.8%.
-- EBITDA: Euro 1,486 million, a 6.8% increase.
-- EBIT: Euro 1,051 million, a 4.1% rise.
-- Cash flow: Euro 1,012 million, up 12.2% compared to the first
quarter 2004.
FINANCIAL POSITION CONTINUES TO IMPROVE
-- At 31 March 2005, ENDESA had net assets of Euro 13,257
million, up by Euro 759 million since the start of the year.
-- At the end of the first quarter, gearing was 143.7%, compared
to 149.6% at the start of the year.
ELECTRICITY BUSINESS IN SPAIN AND PORTUGAL
INCREASE IN NET INCOME DESPITE A CONTEXT OF LOW RAINFALL AND HIGH
FUEL COSTS
-- The Spanish and Portuguese business raised net profit by 21%,
contributing 67.9% of ENDESA's total net income.
-- Low rainfall and high fuel costs, plus the modest increase in
the electricity tariff, meant the industry as a whole recorded
a Euro 629 million loss on regulated business, of which
ENDESA's share was Euro 278 million.
SPAIN'S MOST EFFICIENT POWER COMPANY
-- ENDESA has faced this environment favoured by its generating
mix, more balanced than other sector companies, with lower
variable costs lower than its competitors and thanks to the
evolution of the prices charged to deregulated customers.
-- ENDESA's unit fuel costs between January and March was around
20% below the estimated for the rest of the sector.
LARGEST GENERATOR AND TOP SELLING POWER COMPANY IN THE IBERIAN
MARKET
-- ENDESA generated 24,506 GWh in the Iberian market in the first
quarter, giving it a market share of 37%, 13 points above the
next largest generator. It sold 25,290 GWh, a market share of
39.2%.
-- The Company met 96.9% of its Spanish demand from its own
output giving it a clear competitive advantage over its
rivals, especially in the current context of high prices.
-- ENDESA's coal-fired mainland plants achieved a 92.1%
availability rate in the first quarter of 2005, with an output
sufficient to cover 15.1% of mainland demand during the
period.
-- ENDESA had 746,386 deregulated clients as of 31 March 2005.
-- Its retention rate for customers switching to the deregulated
rate is 87.7%, higher than the average for other companies in
this sector.
-- CO2 emission rights deficit in the first quarter totalled Euro
25 million, corresponding to a deficit of 2.2 million tons.
SIGNIFICANT IMPROVEMENT IN QUALITY OF SUPPLY
-- Average interruption time showed a 4.2% improvement for
markets supplied by ENDESA in the first quarter of 2005 and a
17% improvement in the last 12 months.
-- In some areas improvements have been even more impressive,
such as Catalonia, where supply interruptions were down by 28%
versus the same quarter 2004 and 33% for the last 12 months.
SPAIN'S BIGGEST INVESTING POWER COMPANY
-- ENDESA invested Euro 303 million in Spain in the quarter, of
which Euro 265 million, 87.5%, was capex.
-- Euro 190 million of this capex, 71.7%, was invested in
improving distribution facilities.
SIGNIFICANT PRESENCE IN THE GAS MARKET
-- ENDESA sold 6,354 GWh in the deregulated and regulated markets
in Spain.
-- This figure, together with the 5,431 GWh consumed by ENDESA's
generation plants, amount to a total of 11,785 GWh, implying a
total 11.3% share of the Spanish natural gas market.
ELECTRICITY BUSINESS IN EUROPE
SHARP INCREASE IN EBIT
-- The electricity business in Europe contributed 20.3% of
ENDESA's net income in the first quarter of 2005.
-- EBITDA was Euro 234 million, a 56% rise on the previous year,
contributing to 15.7% to the Group's EBITDA.
-- EBIT was Euro 173 million, up by 44.2% on the first quarter of
2004.
ENDESA ITALIA CONTINUES TO PERFORM WELL
-- ENDESA sold ASM Brescia 5.33% of ENDESA ITALIA for Euro 159
million, at a net capital gain of 24 million.
-- The operation, which left ENDESA with an 80% stake in the
company, implicitly valued ENDESA Italia at Euro 2,989
million, a 36.4% increase on the acquisition price paid by
ENDESA.
-- ENDESA Italia continued its repowering program which
culminated in March with the conversion of its Ostiglia
plant's group 3 to a 400 MW combined cycle generator.
-- The construction of two more 400 MW combined cycle generators
continues at Scandale (Calabria) in a 50/50 joint venture
between ENDESA and ASM Brescia.
-- Proceedings are under way for the construction of two of
IDAS's three wind farms, 100% owned by ENDESA Italia. These
farms will have a total installed capacity of 56 MW.
-- In February 2005, ENDESA Italia paid a dividend of Euro 102
million.
PROGRESS ON IMPLEMENTING THE SNET INDUSTRIAL PLAN
-- ENDESA has presented to the market its Industrial Plan for the
65% owned French generator SNET. The Plan envisages, among
other points, the possible development of 2,000 MW of combined
cycle capacity and up to 50 MW of renewable capacity.
-- In the first quarter of 2005 further steps were taken towards
implementation of this plan with the renegotiation of the
power supply contract with Electricite de France and the
signing of a coal supply contract.
-- Additionally, agreements were reached with trade unions to
ensure stable labour conditions and meet targets for workforce
restructuring.
ELECTRICITY BUSINESS IN LATIN AMERICA
CAPITALISING ON ECONOMIC RECOVERY
-- ENDESA's Latin American business contributed 12.9% of company
total net income in the first quarter of the year.
-- ENDESA companies were able to profit from organic growth in
these markets, raising output and sales by 7.9% and 4.2%
respectively.
STRONG GROWTH IN EBIT AND EBITDA
-- EBIT from the Latin American business was Euro 324 million in
January-March 2005, an increase of 14.5%.
-- EBITDA stood at Euro 432 million, up by 13.1%, contributing to
29.1% of the Group's EBITDA.
TELECOMMUNICATIONS
START OF ORDERLY SALE OF AUNA STAKE
-- Following the gains in Auna's value according to the analysts'
consensus, ENDESA and the other main shareholders have decided
to start an orderly divestment process.
CONSOLIDATED RESULTS
Strong growth in net income: +27%
ENDESA's net income has reached Euro 560 million in the first
quarter of 2005, a rise of 27% on the same period in 2004. Earnings
per share grew by the same proportion to Euro 0.53.
NET INCOME
- --------------------------------------------------------------------
Euro % Chg % of total NI % of total NI
million vs 1Q 04 1Q 2004 1Q 2005
- --------------------------------------------------------------------
Spain and Portugal 380 21.0% 71.2% 67.9%
- --------------------------------------------------------------------
Rest of Europe 114 93.2% 13.4% 20.3%
- --------------------------------------------------------------------
Latin America 72 35.9% 12.0% 12.9%
- --------------------------------------------------------------------
Other businesses (6) N/A 3.4% (1.1)%
- --------------------------------------------------------------------
TOTAL 560 27% 100.0% 100.0%
- --------------------------------------------------------------------
All the company's electricity businesses recorded substantial
increases in net income, with particularly strong performances from
Europe (+93.2%) and Latin America (+35.9%).
The distribution of income by business is increasingly
well-balanced, confirming the economic sense of the geographical
diversification developed by ENDESA over the last few years.
First quarter 2005 results takes into account the recovery of the
amounts contributed to finance the deficit in Spain. Should the tariff
deficit recovery not have been considered, net profit would have
amounted to Euro 379 million, 14.1% lower than the same period of 2004
and net profit for the electricity business in Spain and Portugal
would have been Euro 199 million.
Improved EBIT
Much of the strong rise in net income is attributable to the rise
in electricity generation (+13.2%) and sales (+19.4%) in all
businesses but most notably in Europe, outside Spain and Portugal.
ELECTRICITY GENERATION AND SALES
- ---------------------------------------------------------------------
Generation Sales
- ---------------------------------------------------------------------
GWh % Chg GWh % Chg
vs 1Q 04 vs 1Q 04
- ---------------------------------------------------------------------
Spain and Portugal 24,506 2.8% 25,290 2.7%
- ---------------------------------------------------------------------
Rest of Europe 9,299 72.7% 12,971 124.5%
- ---------------------------------------------------------------------
Latin America 14,558 7.9% 13,492 4.2%
- ---------------------------------------------------------------------
TOTAL 48,363 13.2% 51,753 19.4%
- ---------------------------------------------------------------------
The evolution of the generation in Spain and Portugal (+2.8%) has
underlined once again the advantages of a balanced mix of generating
technologies.
This meant that ENDESA was less hard hit than rival power
companies by the drop in rainfall levels in the first quarter of 2005.
As a result, the company's output for the mainland grew by 2% in
ordinary generation in the period and by 4.2% in the renewable/CHP
segment.
Regarding the electricity generation in the rest of Europe, the
steep increase in output (+72.7%) was mainly due to a 12.9% rise in
output at ENDESA Italia reflecting the development of its repowering
program, as well as the contribution of French company Snet, which was
not fully consolidated in the first quarter of 2004.
In Latin America, generation increase (+7.9%) has reflected the
higher plant utilisation rate to meet rising demand, aided by
contributions from the Ralco hydro plant in Chile and the newly
converted open cycle gas generator at Etevensa in Peru, both of which
came onstream in 2004.
ENDESA can now generate 93.5% of all its electricity sales. This
balanced situation should considerably reduce risks in its electricity
business.
The balance is particularly healthy in the Spanish market where
ENDESA generated 96.9% of the electricity it sold in the first quarter
2005. Active management of the generation/sales balance reduces the
company's exposure to fluctuations in wholesale prices, particularly
important at times like the present, when prices are high.
Total electricity sales amounted Euro 4,187 million, an increase
of 27.9%. Such increase has been higher in economic terms than in
volume as prices rose to offset higher costs in Spain and Portugal and
the Latin American businesses.
The growth in revenues from electricity generation and sales
covered fuel costs which remained at unusually high levels, on average
58.8% above the first quarter 2004. Note that international coal
prices have fallen in the last few months but this has had no impact
on costs for the first quarter 2005. As revenues more than kept pace
with rising costs the company reported rises in gross margin (+10.8%).
EBITDA (+6.8%) and EBIT (+4.1%).
Gross margin EBITDA EBIT
- ----------------------------------------------------------------------
Euro % Chg vs Euro % Chg vs Euro % Chg vs
million 1Q 04 million 1Q 04 million 1Q 04
- ----------------------------------------------------------------------
Spain and Portugal 1,247 2.9% 824 -2.4% 558 -6.7%
- ----------------------------------------------------------------------
Rest of Europe 317 71,4% 234 56,0% 173 44.2%
- ----------------------------------------------------------------------
Latin America 591 13,0% 432 13,1% 324 14.5%
- ----------------------------------------------------------------------
Other businesses - - (4) N/A (4) N/A
- ----------------------------------------------------------------------
TOTAL 2,155 10,8% 1,486 6.8% 1,051 4.1%
- ----------------------------------------------------------------------
As already pointed out, net income reflects the recovery of the
amounts paid out to finance the tariff deficit in Spain generated
during the quarter. Stripping out this effect, total net income would
have been Euro 278 million lower.
Financial results: improvement of 18.1%
ENDESA reported negative financial results of Euro 221 million for
the first quarter of 2005, an 18.1% improvement on the same period
2004.
The net financial expense was Euro 267 million, down by 12.2% or
Euro 37 million.
Average cost of all ENDESA debt was 5.35% in this first quarter of
2005. Stripping out Enersis Group debt, the average cost of ENDESA's
debt was 4.13% in the first quarter 2005.
Enersis's average cost of debt of 9.21% results from its exchange
risk hedging policy by matching revenues with debt denominated in the
same currency. Thereby debt denominated in dollars has been reduced to
50% of total debt, being the remaining 50% split between 27% in
Chilean pesos and 23% in other local currencies.
Asset sales
The company strategy of divesting non-core assets has resulted in
the first quarter of 2005, in the sale of Euro 281 million generating
gross capital gains of Euro 116 million.
In accordance with this policy, ENDESA and the other two key
shareholders in Spanish telecoms operator Auna recently appointed
Merrill Lynch to organise the orderly divestment of Auna stakes and
assets.
Cash flow: up by 12.2%
ENDESA generated operating cash flow of Euro 1,012 million in the
first quarter of 2005, a rise of 12.2% compared to the same period of
2004.
CASH FLOW
- ------------------------------------------------------------
Euro million % Chg vs 1Q 2004
- ------------------------------------------------------------
Spain and Portugal 539 14.0
- ------------------------------------------------------------
Rest of Europe 200 50.4
- ------------------------------------------------------------
Latin America 288 23.6
- ------------------------------------------------------------
Other businesses (15) N/A
- ------------------------------------------------------------
TOTAL 1,012 12.2
- ------------------------------------------------------------
Cash flow rose significantly in all the electricity businesses,
especially in the Rest of Europe and Latin America.
ENDESA paid dividends of Euro 288 million to its shareholders over
the period and Euro 44 million to minority shareholders in its
subsidiaries.
Investment: Euro 453 million, 66.9% in Spain
Total investment by ENDESA in the first quarter of 2005 was Euro
453 million. Of this, Euro 397 million was in capex and the remaining
Euro 56 million was financial investment.
Financial structure: gearing continues to fall
ENDESA's net debt was Euro 19,056 million at 31 March 2005, a Euro
358 million increase since the start of the year.
Of this rise, Euro 195 million was due to the Euro's depreciation
versus other currencies in which ENDESA's or its subsidiaries' debt is
denominated, mainly Enersis debt.
ENDESA NET DEBT
- ----------------------------------------------------------------------
ENDESA and direct Enersis Group Total ENDESA
subsidiaries Group
- ----------------------------------------------------------------------
Euros % Euros % Euros %
Mn /total Mn s/total Mn /total
- ----------------------------------------------------------------------
Euro 14,396 97 4 0 14,400 76
- ----------------------------------------------------------------------
Dollar 415 3 2,120 50 2,535 13
- ----------------------------------------------------------------------
Other currencies 47 0 2,074 50 2,121 11
- ----------------------------------------------------------------------
Total 14,858 100 4,198 100 19,056 100
- ----------------------------------------------------------------------
Fixed 10,076 67 3,779 90 13,855 73
- ----------------------------------------------------------------------
Hedged 1,878 13 419 10 2,297 12
- ----------------------------------------------------------------------
Variable 2,904 20 -27 -1 2,904 15
- ----------------------------------------------------------------------
TOTAL 14,858 100% 4,198 100 19,056 100
- ----------------------------------------------------------------------
Avg. life (years) 5.3 5.8 5.4
- ----------------------------------------------------------------------
The breakdown of debt by business is as follows:
ENDESA NET DEBT BY BUSINESS LINE
- ----------------------------------------------------------------------
Euro million
- ----------------------------------------------------------------------
31-03-05 01-01-05 Change % Chg
- ----------------------------------------------------------------------
Spain and Portugal electricity
business 10,017 9,586 431 4.5
- ----------------------------------------------------------------------
Europe electricity business 1,888 2,123 (235) -11.1
- ----------------------------------------------------------------------
Latin America electricity
business 5,478 5,350 128 2.4
-Enersis Group 4,198 4,081 117 2.9
-Others 1,280 1,269 11 0.9
- ----------------------------------------------------------------------
Other businesses 1,673 1,639 34 2.1
- ----------------------------------------------------------------------
TOTAL 19,056 18,698 358 1.9
- ----------------------------------------------------------------------
In the first quarter of 2005, the average maturity of ENDESA Group
was 5.4 years. It is worth noting, the high degree of protection
against interest rate risk, with 85% of all debt fixed-rate and
hedged.
Cash and equivalent in Spain and direct subsidiaries stood at a
total of Euro 4,750 million at 31 March 2005, including Euro 2,824
million in undrawn credit lines. This figure covers maturities falling
due in the next 11 months for this group of companies
In April ENDESA signed a syndicated loan comprising a Euro 500
million tranche and a Euro 1,500 million credit line tranche, with a
five-year maturity and option to extend it to seven years. This
strengthens the Company's cash position, covering maturities falling
due in the next 20 months.
Enersis group cash and equivalent was Euro 789 million at 31 March
2005, covering debt maturities for the next 16 months.
Also, at 31 March 2005, ENDESA's net assets were Euro 13,257
million, a rise of Euro 759 million since the start of the year.
This increase reduced gearing to 143.7% at 31 March 2005, from
149.6% at the start of the year. Gearing stays in line with the
targets in the Strategic Plan for 2005-2009.
Finally, at 31 March 2005 ENDESA's long-term creditworthiness was
rated A by Standard & Poor's and Fitch and A3 by Moody's.
Accounting criteria
ENDESA has prepared its consolidated financial statements for the
first quarter 2005 in accordance with the valuation and classification
criteria required by International Financial Reporting Standards
(IFRS) approved by the European Union.
Figures for the first quarter of 2004 and 31 December 2004 have
also been drawn up under IFRS to facilitate comparisons. Therefore, do
not correspond to those presented in ENDESA's 2004 consolidated
financial statements which were prepared under Spanish GAAP.
Under IFRS I, which regulates first-time adoption of IFRS,
companies do not need to apply IAS 32 and 39 on financial instruments
to figures from the 2004 financial statements presented for comparison
purposes. ENDESA has taken up this option and 2004 figures therefore
do not include the impact of IAS 32 and 39.
Note, however, that all references to balance sheet items "at 1
January 2005" or "at the start of 2005" refer to the information at 31
December 2004 adjusted for first-time application of IAS 32 and 39.
INFORMATION BY BUSINESS LINE
ELECTRICITY BUSINESS IN SPAIN AND PORTUGAL
High operating efficiency
In the first quarter of 2005, ENDESA sustained its leadership
position on the Spanish electricity market. It has a 37% market share
in generation, more than 13 percentage points ahead of the second
player, a 40.7% market share in distribution and a 39.2% market share
in sales to final customers.
Output in Spain totalled 24,506 GWh, up 2.8% on 2004, and sales in
this market totalled 25,290 GWh implying a 2.7% increase. These output
and sales figures give evidence to the fact that the ENDESA's
production capacity is adequately balanced with respect to the size of
its market.
It is worth pointing out, that following ENDESA's decision to book
equity-accounted affiliates under IFRS, production figures no longer
include 50% of output from Nuclenor which had previously been
included. Consequently, production figures are coherent with accounts.
On the other hand, ENDESA has remained the most efficient company
in the industry with unitary fuel costs around 20% below the estimated
for the rest of the sector.
Over the quarter, ENDESA continued to move forward its New
Capacity Program for 2005-2009 to build 7,200 MW of new capacity, of
which 71.7% will be CCGT and renewables. Its also worth highlighting
that work on the 400 MW Cristobal Colon CCGT plant in Huelva advanced
at a good pace in the first months of 2005.
First quarter 2005 also confirmed the improving trend in ENDESA's
quality of supply seen in 2004, driven by heavy investment in
distribution and operating improvements over the last few years.
Average interruption time showed a 4.2% improvement versus the
first quarter 2004, despite unfavourable weather over the period, and
a 17% improvement in the last 12 months. This reflects the results of
operational improvements and the ongoing investment in distribution
facilities.
In some areas improvements have been even more impressive, such as
Catalonia, where supply interruptions were down by 28% versus the same
quarter 2004 and 33% for the last 12 months.
As for customer services, the retention rate for clients in the
deregulated market was 87.7%, higher than the average of its
competitors, indicating considerable loyalty towards the company.
On the regulation front, in the first quarter 2005, the regulator
made progress towards the final decision on compensation for the extra
generating costs in the islands and other non-mainland systems.
Ensuring an adequate profitability for this business will be good news
for ENDESA, which still the sole supplier for these systems as no
other company has taken a stand to effectively compete in these
markets, despite an improved regulatory regime.
Overall, the first quarter of 2005 brought major advances towards
the key strategic targets for the business: defending its leadership
of the Spanish electricity market, and establishing a perception of
excellent quality.
Net income up 21%
Net income from the electricity business in Spain and Portugal
totalled Euro 380 million in the first quarter of 2005, an increase of
21% with respect to the same period of the previous year.
This figure represents 67.9% of ENDESA's total net income.
It should be pointed out that during January-March 2005 ENDESA
sold non-core assets of this business in Spain amounting to Euro 78
million, with a capital gain of Euro 75 million.
The business in Portugal, carried under the equity method,
contributed Euro 6 million to net income. This means the Spanish
electricity business still accounts for the bulk of net income.
EBIT: Euro 558 million.
EBIT from the electricity business in Spain and Portugal amounted
to Euro 558 million in the first quarter of 2005, down 6.7% on the
same period in 2004. This decline was due mainly to fuel costs net
cost corresponding to the emission rights deficit and fixed costs and
depreciation and amortization.
Higher fuel costs and costs deriving from the emission rights
deficit were reflected in revenues through both higher wholesale
market price and, to a lesser extent, higher price applied to
deregulated customers, allowing for a 26.6% increase in revenues, with
a gross margin of Euro 1,247 million, 2.9% higher than in the first
quarter of 2004.
However, the higher revenues did not offset the increase in fixed
costs and depreciation and amortization linked mainly to the
investment and maintenance efforts made by the company within the
framework of its Quality Excellence Plan. This effort should imply an
increase in remuneration from distribution when the new regulation is
approved.
Low rainfall levels and high fuel costs have pushed up generation
pool prices, which, given the limited growth in electricity tariffs
(1.7%), caused a deficit in revenues from regulated activities in the
sector of an estimated Euro 629 million.
For ENDESA, impact of low rainfall and fuel cost increase was
mitigated to some extent by its more balanced generation mix compared
to its rivals, which means that low rainfall has less of a negative
impact, and due to the fuel management policy, which has enabled the
group to contain the cost increase.
Below we provide a more detailed analysis of the items comprising
EBIT for ENDESA's electricity business in Spain and Portugal:
Revenues: Up by 26.6%
Revenues totalled Euro 2,158 million in the first quarter of 2005,
26.6% higher than in 1Q04.
Of this amount, Euro 2,048 million are sales, which increased by
22.6% with respect to the first quarter of 2004.
SALES IN SPAIN AND PORTUGAL
- ----------------------------------------------------------------------
Euro million
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 Change % Chg.
- ----------------------------------------------------------------------
Peninsular generation in
the ordinary regime:
- ----------------------------------------------------------------------
Supply to deregulated
customers 367 281 86 30.6
- ----------------------------------------------------------------------
Supply to regulated
customers 775 474 301 63.5
- ----------------------------------------------------------------------
Generation in renewables/CHP
(a) 37 - 37 N/A
- ----------------------------------------------------------------------
Mainland distribution 397 387 10 2.6
- ----------------------------------------------------------------------
Non-mainland regulated
generation 288 214 74 34.6
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Coal CTC 7 22 (15) -68.2
- ----------------------------------------------------------------------
Technological CTC 143 (143) N/A
- ----------------------------------------------------------------------
Supply to deregulated clients
outside Spain 55 42 13 31.0
- ----------------------------------------------------------------------
Gas distribution 11 9 2 22.2
- ----------------------------------------------------------------------
Gas supply 100 30 70 233.3
- ----------------------------------------------------------------------
Others 11 68 (57) 83.8
- ----------------------------------------------------------------------
TOTAL 2,048 1,670 378 22.6
- ----------------------------------------------------------------------
(a) In the first quarter of 2004, sales amounted to Euro 27
million, recorded under "other businesses"
Mainland generation
In the first quarter of 2005, electricity demand in the Spanish
mainland grew by 7.1% compared to same period of 2004. Ordinary regime
generation increased by 4%, on the back of the 10.8% increase in
renewables/CHF output.
ENDESA's mainland electricity output totalled 21,153 GWh, implying
a 2.0% increase in relation to the first quarter of 2004. Of this
amount, 20,684 GWh corresponded to ordinary regime output sold in the
wholesale market, a figure that is 2% higher than that of 1Q04.
Changes in the structure of ENDESA's ordinary regime mainland
production and that of the rest of the sector between the first
quarter of 2004 and the same period of 2005 reflect the strength of
the Company's generation portfolio and its greater stability in the
event of sharp variations in normal rainfall rates in Spain.
Between the two quarters, nuclear and hydroelectric electricity
generation at ENDESA declined by 13.8%, whereas in the rest of the
sector the decline was 27%. Similarly, thermal production in the
sector had to increase by 41.3% between the two periods, whereas at
ENDESA it rose by just 15.5%.
Under these rainfall conditions, the need for the coal-fired
generation to meet electricity demand in Spain is brought to the fore.
ENDESA's coal-fired plants achieved a 92.1% availability rate in the
first quarter of 2005, with an output sufficient to cover 15.1% of
mainland demand during the same period.
Sales to the pool came to Euro 1,240 million, 75.6% higher than in
the first quarter of 2004. This change was due to the 74.1% increase
in the average pool revenues, including the capacity payment. The
increase in average wholesale prices was due to the increase in fuel
costs and the extremely dry weather conditions which have led to lower
use of hydroelectric plants.
In absolute terms, the average pool price for the period including
capacity payments was Euro 54,5 per MWh, vs. Euro 31.3 per MWh in the
first quarter of 2004.
ENDESA's supply subsidiary acquired energy from the "pool" for an
amount of Euro 465 million that was hedged with ENDESA's energy sold
to the "pool" during the same timeframe, therefore matching both
prices.
In accordance with IFRS, amounts deriving from this "pool" are
neutralized with purchases made by the supply subsidiary. Thus, "pool"
sales recorded in the consolidated P&L of the first quarter of 2005
amounts to Euro 775 million.
Renewable/CHF subsidiaries consolidated by ENDESA under the global
method generated 469 GWh in the first quarter of 2005, mainly by
tapping renewable energies (4.2% more than in the same period in
2004). Furthermore, ENDESA has holdings in other special regime
companies which produced 1,037 GWh in the first quarter of the year.
Revenues from special regime energy sales of consolidated
subsidiaries amounted to Euro 37 million, a 37% increase on 2004,
leading EBIT at ECYR, ENDESA's subsidiary in the cogeneration and
renewables sector, to Euro 17 million in the first quarter of 2005,
fully integrated in the Spain and Portugal business.
In the first quarter of 2004, ECYR obtained EBIT of Euro 11
million which was then integrated with other businesses. Consequently,
operating income in renewable/CHF generation at ENDESA increased by
54.6% in the first quarter of 2005 with respect to the same period in
2004.
Supply to deregulated customers
ENDESA had 746,386 deregulated clients as of 31 March 2005.
ENDESA sold these customers a total of 7,654 GWh in the first
quarter, 22.9% more than in the same period last year.
Revenues from supply to deregulated clients totalled Euro 367
million, up 30.6% with respect to the previous year. Of this increase,
22.9% corresponds to the increase in GWh sold and 10.7% to the
increase in the average price.
Mainland distribution
ENDESA distributed 28,551 GWh of electricity in the Spanish market
in the first quarter of 2005, a 7.5% increase on the same period of
2004.
Revenues from regulated distribution amounted to Euro 397 million,
an increase of 2.6% versus the same period 2004.
This slight increase does not reflect the effort, in terms of both
investment and operation and maintenance, required to increase
security and quality of supply. Consequently, in order to attain an
objective which is shared by all players in the electricity market,
and in whose pursuit ENDESA plays an outstanding role (with an
investment of Euro 190 million in January-March 2005) it is essential
that the new regulation for distribution recognises this effort via
adequate remuneration.
ENDESA Distribucion Electrica supplied 16,595 GWh to customers at
the regulated market. Nevertheless, in accordance with IFRS it has not
been booked as revenues, as the only distribution revenue is the
regulated margin. The rest of items are simply accounting for expenses
incurred.
Non-mainland regulated generation
ENDESA's output in non-mainland systems was 3,353 GWh in the first
quarter of 2005, 7.8% more than in the same period of 2004.
Sales totalled Euro 288 million, implying an increase of 34.6% on
2004.
Royal Decree 1747/2003 governing mainland and non-mainland
electricity systems recognizes the higher cost of generation in the
latter owing to the larger reserve margin required, extra cost of the
specific technologies used and to higher fuel costs. The Royal Decree
lays down the general principles that must be applied to determine the
compensation deriving from these specific circumstances, although the
exact methodology for quantifying these has yet to be established.
In the first quarter of 2005, no additional effect was included on
top of the compensation envisaged in the 2005 electricity tariff -
this is pending the definitive regulatory outcome which is due to be
unveiled in the next few months.
Technological CTCs and regulated business deficit
As already pointed out, in the first quarter of 2005, regulated
revenues were not sufficient to offset system costs, and an estimated
deficit of Euro 629 million ensued.
Attending to Royal Decree Law5/ 2005 of March 11th, ENDESA must
contribute 44,16% of the total amount of this deficit (Euro 278
million).
Pursuant to the criteria of ENDESA's legal advisers and taking
into account the legal nature and antecedents of this financing as
well as jurisprudence criteria, the Company its entitled to the
complete recovery of the amounts rendered. Nevertheless, the
government must establish specific proceedings the recovery as it did
in 2002. This standpoint has also been supported by the Spanish
Asociation of the Energy Industry (UNESA), as well as all of its
members.
For this reason, ENDESA's accounts as of 31 March 2005 include
financial assets of Euro 278 to provide for the right of recovery of
the amounts contributed under this heading.
In the first quarter of 2004, CTC revenues amounted to Euro 143
million.
Supply to deregulated clients outside Spain
ENDESA Energia sold 1,.041 GWh to deregulated customers outside
Spain in the first quarter of 2005. 12.2% more than in the same period
last year.
Revenues from these sales totalled Euro 55 million, 31% more than
in 1Q04.
Gas distribution and supply: total market share of 11.3%
ENDESA sold 5,901 GWh of gas in the first quarter of 2005, through
companies included in the consolidation perimeter, implying a 69.3%
increase vs. the same period one year previously.
Of this amount, 4,570 GWh were sold on the deregulated market, up
99.3% on the first quarter of 2004, and 1,331 GWh on the regulated
market, an 11.7%more than in the same period.
In addition to this last figure 453 GWh of total sales correspond
to companies that are not fully consolidated given their scant
contribution to the Group total. Consequently, total sales in the
regulated market amounted to 1,784 GWh, up 15.4% with respect to the
first quarter of 2004.
The 6,354 GWh sold in both markets, together with the 5,431 GWh
consumed by ENDESA's generation plants, amount to a total of 11,785
GWh, implying a total 11.3% share of the Spanish natural gas market.
Revenues from gas sales in the deregulated market in the first
quarter of 2005 totalled Euro 100 million, implying an increase of
Euro 70 million vs. the same period in 2004.
Revenues from regulated gas distribution amounted to Euro 11
million in the first quarter of 2005, up 22.2% on last year.
Other operating revenues
Other operating revenues in the first quarter of 2005 totalled
Euro 110 million, Euro 76 million more than the same period one year
earlier.
This year, this heading included Euro 67 million corresponding to
the booking as revenues of the part of CO2 emission rights assigned to
ENDESA from emissions made in the first quarter of the year. These
revenues were recorded at the market price for emission rights at the
start of 2005.
Operating expenses
The table below shows the breakdown of operating expenses for
ENDESA's Spanish and Portuguese business.
OPERATING EXPENSE IN SPAIN AND PORTUGAL
- ----------------------------------------------------------------------
Euro million
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 Change % Chg
- ----------------------------------------------------------------------
Purchases and services 911 492 419 85.2
- ----------------------------------------------------------------------
Energy purchases 216 141 75 53.2
- ----------------------------------------------------------------------
Fuel consumption 488 267 221 82.8
- ----------------------------------------------------------------------
Power transmission expenses 69 44 25 56.8
- ----------------------------------------------------------------------
Other purchases and services 138 40 98 245.0
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Personnel expenses 214 193 21 10.9
- ----------------------------------------------------------------------
Other operating expenses 237 205 32 15.6
- ----------------------------------------------------------------------
Depreciation and amortization 266 246 20 8.1
- ----------------------------------------------------------------------
TOTAL 1,628 1,136 492 43.3
- ----------------------------------------------------------------------
Power purchases
The 53.2% increase in power purchases, used mainly to facilitate
pumping activities in hydroelectric plants and to carry out operations
on the wholesale generation market, is linked to the increase in the
pool price where most of these purchases are made and to gas purchases
for supply.
Fuel consumption
Fuel consumption amounted to Euro 488 million in the first
quarter, an increase of 82.8% vs. the same period in 2004.
This increase is due to the fact that, as a result of the extreme
drought in the first quarter, fuel-oil production has increased, with
higher unit costs than the other technologies, and to the 45% increase
in the unit cost of imported coal, even though ENDESA paid below the
odds thanks to its active fuel purchase management policy.
In any case, is worth to highlight that more than half of the
increase in unit fuel cost results from a transitory deterioration of
the generation mix, due to lower hydro conditions, and not from the
evolution of fuel prices.
Other supplies and services
Expenses under this heading totalled Euro 138 million, up Euro 98
million vs. the same period in 2004.
This increase was due to booking Euro 92 million in expenses from
emission rights required to cover the mainland CO2 emissions made in
the first quarter of the year, which totalled 10.8 million tonnes.
Expenses for these emissions were valued as follows:
-- The part of these emissions covered by freely assigned
emission rights was valued at the same price at which the
revenues are booked, i.e., the market price at the start of
2005.
-- The part of these emissions covered by rights acquired in the
market was recorded at the price paid for these rights.
-- The part of these emissions for which ENDESA does not own
rights was recorded at the market price of the rights as of 31
March 2005, Euro 14.26 per tonne.
The net effect of revenues and expenses booked in the first
quarter of 2005 to cover CO2 emissions, totalled Euro 25 million,
corresponding to the estimated rights deficit for the quarter, which
came to 2.2 million tonnes.
At the date of publication of these earnings, no accounting rule
for recording emission rights had been enacted, as IFRIC 3 (IFRS
standards) has not be ratified by the EU (European Union) and the
EFRAG (European Financial Reporting Advisory Group) has issued an
endorsement advice letter on IFRIC 3 Emission Rights in which it has
decided to recommend the EU Commission not to endorse IFRIC 3 in
Europe.
In this respect, ENDESA has recorded the emission rights based on
IFRIC 3, but modifying the points opposed by the EFRAG. Therefore, the
accounting is provisional and subject to change when the new
accounting rule is issued.
Personnel expenses
At 31 March 2005, the workforce in Spain and Portugal totalled
12,832, down 0.4% on 2004 year-end.
Personnel expenses amounted to Euro 214 million in 1Q05, an
increase of 10.9% vs. the same period in 2004.
This rise came as a result of the wage increase for 2005 and the
impact on the cost of employment restructuring of higher inflation in
the first quarter, implying an increase of Euro 9 million in
provisions against the cost of these redundancies. The effect in 2004
was only recorded at year-end, once the definitive inflation rate was
published.
Other fixed operating expenses
Other fixed operating expenses totalled Euro 237 million in the
first quarter of 2005, an increase of Euro 32 million with respect to
2004.
This increase was due mainly to the cost of operating and
maintaining the distribution network and to the inclusion of the
renewables/CHF business, which includes expenses under this heading
totalling Euro 9 million.
However, we note that in the first quarter of the year there has
been a significant decline in costs with respect to the last few
quarters of 2004.
Net financial expenses: 27.1% improvement on a like-for-like basis
ENDESA reported a financial result for the first quarter of 2005
of Euro 116 million. Of this amount, Euro 113 million correspond to
net financial expenses, which include Euro 15 million corresponding to
the cost of preferred shares considered as debt in 2005, and,
therefore, its cost is booked as financial expenses. In the first
quarter of 2004 they were booked as minority interests since IAS 32
was not applied last year and preferred shares were booked as minority
interests and not as financial debt. On a like-for-like basis, net
financial expenses declined Euro 42 million, a 27.1% decrease.
Net debt in the Spain and Portugal business totalled Euro 10,017
million as of 31 March 2005, vs. Euro 9,586 million at the start of
2005. This increase came from the cyclical effect of the first quarter
of each year, when a significant amount of capex and expenses from
last quarter of the previous year is disbursed, as well as 2004
interim dividend payment on the first quarter that amounted to Euro
288 million.
Equity-accounted income: Euro 10 million
Equity-accounted income in ENDESA's electricity business in Spain
and Portugal in the first quarter of 2005 amounted to Euro 10 million
and mostly includes Euro 6 million from subsidiaries in Portugal and
Euro 9 million from generation subsidiaries operating under the
special regime.
In the first quarter of 2004, Euro 5 million and Euro 3 million
were recorded under the European business and Other businesses,
respectively.
Asset divestments: Euro 75 million in capital gains
In the first quarter of 2005, ENDESA shed assets from the
electricity business in Spain and Portugal for Euro 86 million,
posting capital gains of Euro 75 million.
Among them we highlight the sale of land in Palma de Mallorca
where GESA's headquarters was formerly located, for Euro 73 million
after sale costs, implying capital gains of Euro 65 million.
Cash flow: up 14%
Cash flow amounted to Euro 539 million in the first quarter of
2005, an increase of 14% vs. the same period in 2004.
Capex: Euro 190 million in distribution.
Capex in Spain and Portugal came to Euro 303 million in the first
quarter of 2004, 34.7% higher than the same period in 2004.
TOTAL INVESTMENT IN SPAIN AND PORTUGAL
- ----------------------------------------------------------------------
Euro million
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Tangibles 265 192 38.0
- ----------------------------------------------------------------------
Intangibles 13 3 333.3
- ----------------------------------------------------------------------
Financial 25 30 16.7
- ----------------------------------------------------------------------
Total investments 303 225 34.7
- ----------------------------------------------------------------------
87.5% of total capex was tangible, used in developing or improving
electricity generation and distribution facilities, in order to
maintain ENDESA 's leadership in the Iberian market.
INVESTMENT IN TANGIBLE ASSETS IN SPAIN AND PORTUGAL
- ----------------------------------------------------------------------
Euro million
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Generation 71 46 54.3
- ----------------------------------------------------------------------
Ordinary regime 68 46 47.8
- ----------------------------------------------------------------------
Renewables/CHF 3 (a)
- ----------------------------------------------------------------------
Distribution 190 127 49.6
- ----------------------------------------------------------------------
Others 4 19 N/A
- ----------------------------------------------------------------------
Total 265 192 38.0
- ----------------------------------------------------------------------
(a) In the first quarter of 2004 were included in other businesses
and amounted to Euro 34 million.
- ----------------------------------------------------------------------
Similarly, the breakdown of tangible capex reflects the
considerable effort made by the Company over the last few years to
improve the quality of its service, since investment in distribution
facilities accounts for 71.7% of total tangible capex in this
business. As we have said, the new regulation for distribution should
adequately remunerate these investments.
Electricity business in Europe
Excellent economic results and sound growth opportunities
In the rest of Europe, ENDESA focused on two of its main strategic
targets in the first quarter of 2005: consolidating its position in
this market and seeking new growth opportunities.
On 1 February 2005 ENDESA sold ASM Brescia, its partner in ENDESA
Italia, 5.33% of its stake in that company for a total of Euro 159
million, with a net capital gain of Euro 24 million. Following this
operation, ENDESA's stake in ENDESA Italia stands at 80%. The
transaction also unlocks the value of ENDESA Italia, as it suggests an
implicit valuation of Euro 2,989 million for the company, 36.4% higher
than the price paid by ENDESA when it originally acquired the Italian
group in 2001.
We also highlight that in the middle of March culminated the
repowering work to Ostiglia plant's group 3 to a 400 MW combined cycle
generator.
Also, work is on schedule for the construction of two 400 MW
combined cycle groups at the Scandale plant in Calabria. This project
was acquired at the end of December 2004 by ENDESA and ASM Brescia
(50/50).
In addition, proceedings are underway for the construction of two
of IDAS' three wind farms - 100% of which was awarded to ENDESA Italia
at the end of December last year. The two farms will have an installed
capacity of 56 MW and are expected to come on-stream in mid 2006.
ENDESA has reached an agreement with the Italian group Merloni to
supply electricity to the retail market. The supply base for the power
sold will be ENDESA Italia's generation capacity. The Merloni group
will contribute a portfolio of more than 2,000 customers in Italy and
sales volumes of over 2 TWh.
Is also worth to highlight that in February 2005, ENDESA Italia
paid a dividend of Euro 102 million.
On 17 February, ENDESA presented an outline of its Industrial Plan
for the French generation group Snet (65% ENDESA). This Plan envisages
the possibility of investment in new capacity using its current sites
with a total of 2,000 MW in new CCGT capacity and 200 MW in renewable
capacity.
Additionally, in the first quarter of 2005 the power supply
contract with EDF was successfully re-negotiated, a coal supply
contract has been signed and agreements were reached with the trade
unions to ensure stable labour conditions and meet targets for
workforce restructuring.
Net income: up 93.2%
Net income from the electricity business in Europe totalled Euro
114 million in the first quarter of 2005, an increase of 93.2% with
respect to 2004.
The table below shows a breakdown of output and sales figures by
country:
BREAKDOWN OF ENDESA'S GENERATION AND SALES IN EUROPE
- ----------------------------------------------------------------------
Generation Sales
- ----------------------------------------------------------------------
(GWh) 1Q 2005 1Q 2004 % Chg. 1Q 2005 1Q 2004 % Chg.
- ----------------------------------------------------------------------
Italia 6,081 5,384 12.9 8,410 5,777 45.6
- ----------------------------------------------------------------------
Francia 2,533 - - 3,876 - -
- ----------------------------------------------------------------------
Polonia(b) 685 - - 685 - -
- ----------------------------------------------------------------------
Total 9,299 5,384 72.7 12,971 5,777 124.5
- ----------------------------------------------------------------------
(b) ENDESA is present in the generation business in Poland through
the stake held by Snet in the Bialystock co-generation plant.
- ----------------------------------------------------------------------
EBIT: growth of 44.2%
EBITDA and EBIT for the group's European electricity business can
be broken down as follows:
EBITDA & EBIT IN EUROPE
- ----------------------------------------------------------------------
Euro Million EBITDA EBIT
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 % var. 1Q 2005 1Q 2004 % var.
- ----------------------------------------------------------------------
ENDESA Italia 189 152 24.3 156 122 27.9
- ----------------------------------------------------------------------
Snet 43 - N/A 15 - N/A
- ----------------------------------------------------------------------
Trading 7 1 600.0 7 1 600.0
- ----------------------------------------------------------------------
Holding & Others (5) (3) N/A (5) (3) N/A
- ----------------------------------------------------------------------
Total 234 150 56.0 173 120 44.2
- ----------------------------------------------------------------------
Positive performance of ENDESA Italia continues
The following table shows changes in ENDESA Italia's EBIT between
the first quarter of 2005 and the first quarter of 2004.
ENDESA ITALIA KEY DATA
- ----------------------------------------------------------------------
Millones de euros
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 Diferencia % var.
- ----------------------------------------------------------------------
Revenues 560 389 171 44.0
- ----------------------------------------------------------------------
Energy purchases (95) (14) (81) 578.6
- ----------------------------------------------------------------------
Fuel procurement cost (211) (187) (24) 12.8
- ----------------------------------------------------------------------
Transmission expenses (2) (1) (1) 100.0
- ----------------------------------------------------------------------
Other purchases and services (24) - (24) N/A
- ----------------------------------------------------------------------
Gross Margin 228 187 41 21.9
- ----------------------------------------------------------------------
Capitalized expenses 1 1 - -
- ----------------------------------------------------------------------
Personnel expenses (17) (16) (1) 6.3
- ----------------------------------------------------------------------
Other expenses (23) (20) (3) 15.0
- ----------------------------------------------------------------------
EBITDA 189 152 37 24.3
- ----------------------------------------------------------------------
Depreciations (33) (30) (3) 10.0
- ----------------------------------------------------------------------
EBIT 156 122 34 27.9
- ----------------------------------------------------------------------
Revenues reported by the Italian group grew 44% due largely to the
45.6% rise in energy sold. The company sold 8,410 GWh of electricity
in the quarter, of which 2,329 GWh were acquired from third parties at
a cost of Euro 95 million.
ENDESA Italia generated a total of 6,081 GWh of electricity this
quarter, an increase of 12.9% vs. the same period last year. Its
market share in Italy was 8.2% at March 2005, up 1.3% vs. 1Q04.
The repowering program implemented by ENDESA Italia has allow the
group not only to increase its production using a more efficient mix
by replacing fuel-gas output with power generated by combined cycle
plants, but also a grater capacity to mitigate the impact of fuel
price increases. For this reason, costs at ENDESA Italia only rose by
12.8% - in line with the increase in output.
The positive impact of the repowering program on the company's
generation structure can be clearly seen if we compare the breakdown
by technology in the first quarter of 2004 with the first quarter of
2005. The weight of CCGT capacity in the production mix has increased
from 25.7% to 45.9%, while the weight of fuel-gas has declined from
40.7% to 17.8%.
On 1 October 2004 the European Union approved payment of the
stranded costs recognised in Italy. Of the total amount recognised,
Euro 169 million correspond to ENDESA Italia. The method and schedule
for the payment of these stranded costs have yet to be defined and for
this reason no revenues deriving from this concept have been booked in
our forecasts.
Financial results: Euro 235 million debt reduction
Financial results for the electricity business in Europe reflected
a cost of Euro 15 million in the first quarter of 2005, the same as in
the first quarter of 2004. We note that since 31 March 2004, ENDESA
has acquired an additional 35% stake in Snet, without this leading to
any increase in financial expenses for this business.
Net debt of the European business stood at Euro 1,888 million at
31 March 2005, compared to Euro 2,123 million at the beginning of the
year - a reduction of Euro 235 million, or 11.1%.
Cash flow: growth of 50.4%
Cash flow generated from group operations stood at Euro 200
million, a rise of 50,4% compared to 2004.
Cash flow amounted to Euro 200 million, an increase of 50.4%
compared to the first quarter of 2004.
Capex: Euro 45 million
Investment in the European electricity business stood at Euro 45
million in the first quarter.
This was virtually all capex. Of the total recognised, Euro 36
million correspond to ENDESA Italia and Euro 5 million to Snet.
Additionally, in the first quarter of 2005, the following
divestments were made:
-- 5.33% of ENDESA Italia was sold to ASM Brescia for Euro 121
million, generating a net capital gain of Euro 24 million.
Following this divestment, ENDESA now holds 80% of ENDESA
Italia and ASM Brescia holds the remaining 20%.
-- The 18% stake held by ENDESA in the Moroccan water group LYDEC
was sold for Euro 26 million, generating a net capital gain of
Euro 12 million.
Electricity business in Latin America
Capitalising on economic recovery: strong growth in output and
sales
The process of economic recovery in Latin America seen in 2004 was
confirmed in the first quarter of 2005 leading to increases in
electricity demand up to 8.1%.
This increase in demand boosted generation at ENDESA's
subsidiaries, which showed an average growth of 7.9% compared to the
same period last year.
Average sales grew by 4.2% vs. first quarter 2004 in all areas in
which ENDESA's subsidiaries operate.
Generation and distribution figures for ENDESA's Latin American
subsidiaries were as follows:
GENERATION AND DISTRIBUTION OF THE LATIN AMERICAN BUSINESS
- ----------------------------------------------------------------------
Generation (GWh) Distribution (GWh)
- ----------------------------------------------------------------------
1Q 2005 % chg 1Q 2005 % chg
- ----------------------------------------------------------------------
Chile 4,301 8.8 2,823 3.7
- ----------------------------------------------------------------------
Colombia 2,855 0.7 2,386 1.2
- ----------------------------------------------------------------------
Argentina 4,719 14.0 3,516 2.2
- ----------------------------------------------------------------------
Brazil 1,129 -13.8 3,665 8.1
- ----------------------------------------------------------------------
Peru 1,554 23.5 1,102 5.9
- ----------------------------------------------------------------------
TOTAL 14,558 7.9 13,492 4.2
- ----------------------------------------------------------------------
Growth shown by the markets supplied by ENDESA and tighter reserve
margins caused a generalized increase in prices and margins. This was
reflected in the good operating performance with EBIT rising 22.9% in
the generation and transmission business and 6.3% in distribution.
The strong business performance was reflected by both Enersis and
ENDESA Chile's share prices, the main subsidiaries in this activity,
which have risen by 27.1% and 55.1%, respectively, in the last 12
months.
Net income growth of 35.9%
Net income from the electricity business in Latin America totalled
Euro 72 million in the first quarter of 2005, an increase of 35.9%
with respect to 2004. This figure accounted for 12.9% of ENDESA's
total net income in the period.
EBIT: growth of 14.5%
The table below sets out EBITDA and EBIT for ENDESA's Latin
American electricity business, broken down by activity:
EBITDA & EBIT IN LATIN AMERICA
- ----------------------------------------------------------------------
Millones de euros
- ----------------------------------------------------------------------
EBITDA EBIT
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 % Chg 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Generation and
transmission 264 220 20.0 204 166 22.9
- ----------------------------------------------------------------------
Distribution 184 172 7.0 135 127 6.3
- ----------------------------------------------------------------------
Others (16) (10) N/A (15) (10) N/A
- ----------------------------------------------------------------------
Total 432 382 13.1 324 283 14.5
- ----------------------------------------------------------------------
The following table shows a breakdown of EBITDA and EBIT by
country where ENDESA operates through fully consolidated subsidiaries.
BREAKDOWN OF EBITDA AND EBIT IN LATAM BY BUSINESS LINE
- ----------------------------------------------------------------------
Generation and transmission
- ----------------------------------------------------------------------
Euro million EBITDA EBIT
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 % Chg 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Chile 71 68 4.4 45 49 -8.2
- ----------------------------------------------------------------------
Colombia 54 47 14.9 43 36 19.4
- ----------------------------------------------------------------------
Brazil - Generation 32 16 100.0 28 13 115.4
- ----------------------------------------------------------------------
Brazil - Transmission 21 21 0.0 17 17 0.0
- ----------------------------------------------------------------------
Peru 42 31 35.5 32 21 52.4
- ----------------------------------------------------------------------
Argentina - Generation 40 33 21.2 35 26 34.6
- ----------------------------------------------------------------------
Argentina - Transmission 4 4 0.0 4 4 0.0
- ----------------------------------------------------------------------
TOTAL 264 220 20.0 204 166 22.9
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Distribution
- ----------------------------------------------------------------------
Euro million EBITDA EBIT
- ----------------------------------------------------------------------
1Q 2005 1Q 2004 % Chg 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Chile 37 36 2.8 32 32 0.0
- ----------------------------------------------------------------------
Colombia 49 48 2.1 31 32 -3.1
- ----------------------------------------------------------------------
Brazil 58 44 31.8 45 31 45.2
- ----------------------------------------------------------------------
Peru 18 18 0.0 11 12 -8.3
- ----------------------------------------------------------------------
Argentina 22 26 -15.4 16 20 -20.0
- ----------------------------------------------------------------------
TOTAL 184 172 7.0 135 127 6.3
- ----------------------------------------------------------------------
Generation and transmission
-- Chile
Revenues increased 18.5% on the back of the increase in energy
generated (+8.8%) due to the Ralco hydroelectric plant joining the
grid, and prices in the various systems remaining unchanged. However,
these increase was partially offset by the gas supply problems
affecting thermal plants which required replacing with liquid fuels.
In this context, production at the Ralco plant led to EBITDA of
Euro 71 million, 4.4% higher than in the first quarter of 2004.
However, EBIT after depreciation fell by Euro 4 million - half of
which was due to the Chilean peso/euro exchange rate.
-- Colombia
Sales in the Colombian generation business stood at Euro 88
million, a 10% increase from the first quarter of 2004, due to the
better generation mix.
This increase in sales was fully passed onto EBITDA and EBIT which
increased by 14.9% and 19.4% respectively.
-- Brazil - Generation
Rainfall conditions during the quarter led to increased production
at the Cachoeira Dourada (hydroelectric) plant and a decrease in
production at the Fortaleza (CCGT) plant.
Sales were Euro 49 million - a rise of 32.4% vs. 2004. This
increase, coupled with lower fuel consumption, led to a 100% increase
in EBITDA (Euro 32 million) and a 115.4% rise in EBIT (Euro 28
million).
-- Brazil - Transmission
EBITDA and EBIT for the interconnection between Brazil and
Argentina remained stable at Euro 21 million and Euro 17 million
respectively, with no significant changes in results components.
However, the difficulties in finding available electricity in
Argentina to export to Brazil, due to gas supply restrictions, could
have an impact on results at this interconnection in the next few
months.
-- Peru
Sales in the Peruvian generation business stood at Euro 64
million, a 16.4% increase from the first quarter of 2004 despite the
drop in prices caused by the improved rainfall conditions. However,
the 23.5% increase in power generated offset this effect.
Also, improved rainfall conditions led to a Euro 7 million
decrease in fuel costs. In total, EBITDA and EBIT both rose by Euro 11
million to Euro 42 million and Euro 32 million respectively.
-- Argentina
Sales in the Argentinean generation business stood at Euro 75
million, a 34.8% increase from the first quarter of 2004, due to the
increase in production and prices (especially spot market prices).
The rise in sales was partly offset by the rise in fuel costs
which doubled due to problems with the gas supply and the necessity to
produce with liquid fuels.
Nonetheless, both EBITDA and EBIT rose 21.2% and 34.6%
respectively.
Distribution
-- Chile
Both EBITDA and EBIT remained stable vs. 2004 given that the
increase in sales caused by the rise in demand was offset by the
contraction in margins prompted by the latest tariff revision.
-- Colombia
EBITDA and EBIT for the Colombian distribution business varied
very little compared to the same period last year as the 11% increase
in sales (to Euro 138 million) was offset by the higher power purchase
costs and the increase in fixed costs.
-- Brazil
Sales in the Brazilian distribution business stood at Euro 269
million, a 17% increase from the first quarter of 2004. This increase
was due to the advance in volumes, and, to a lesser extent, to the
rise in prices.
This led to an EBITDA of Euro 58 million and EBIT of Euro 45
million - an advance of 31.8% and 45.2% respectively vs. 2004.
-- Peru
EBITDA from the Peruvian distribution business remained unchanged
vs. 2004 at Euro 18 million while EBIT fell by Euro 1 million.
This was due to the similar performance marked by sales (Euro 71
million, +14.5% vs. 2004) and power purchases (+15.8%).
-- Argentina
EBITDA and EBIT in the Argentinean distribution business fell by
Euro 4 million vs. 2004. This was because 2004 figures included Euro
10 million corresponding to the compensation received from Alsthom due
to the Arzopardo supply incident.
Stripping out this impact, EBITDA and EBIT would have grown by 38%
and 60%, respectively.
Financial results: 9% improvement in financial expenses
Financial results for the group's business in Latin America
reflected a loss of Euro 71 million in the first quarter of 2005, a
fall of Euro 42 million on the same quarter in 2004. Of this figure,
Euro 30 million corresponded to exchange differences (a positive
amount of Euro 50 million in the first quarter of 2005 vs. Euro 20
million in the same period last year).
Net financial expenses totalled Euro 121 million, Euro 12 million,
or 9%, lower than in 2004.
Net debt at ENDESA's Latin American business stood at Euro 5,478
million at 31 March 2005, increasing by Euro 128 million since the
beginning of the year. This increase in net debt is due to the
depreciation of the euro against the currencies in which the group's
Latam subsidiaries hold their debt, which has prompted an total
increase of Euro 193 million. Stripping out the impact of this
depreciation, debt at this division would have fallen by Euro 65
million.
Cash flow: growth of 23.6%
Cash flow generated by the group's business in Latin America
totaled Euro 288 million in the first quarter of 2005, an increase of
23.6% with respect to 2004.
Investments: Euro 103 million
Investments in the Latin American electricity market were Euro 103
million in the first quarter of the year. Of this sum, Euro 76 million
was capex - broken down as follows:
INVESTMENT IN LATIN AMERICA
- -----------------------------------------------------------------
Euro million
- -----------------------------------------------------------------
1Q 2005 1Q 2004 % chg
- -----------------------------------------------------------------
Generation 21 68 -69.1%
- -----------------------------------------------------------------
Distribution 52 44 18.2%
- -----------------------------------------------------------------
Others 3 3 -
- -----------------------------------------------------------------
Total 76 115 -33.9%
- -----------------------------------------------------------------
The decrease in capex was due mainly to the completion of the
construction of the Ralco hydroelectric plant which came on-stream in
the second half of 2004.
TELECOMS
Auna: a positive contribution to net income
The Spanish telecoms operator Auna contributed Euro 5 million to
ENDESA's net income in the first quarter of 2005 in accordance with
the stake held by the utility. This is an increase of Euro 4 million
compared to same period in 2004.
Revenues rose 12% in the quarter to Euro 1,092.4 million and
EBITDA 15% to Euro 266.7 million.
At March 31 2005, Auna had 9.6 million mobile customers and over
942,461 direct access customers (35% and 13% more than at December
2004 respectively).
In the first quarter of this year, ENDESA and Auna's other core
shareholders started an orderly divestment process as a result of its
positive valuation evolution.
At 31 March 2005, ENDESA's 32.7% stake in Auna had a book value of
Euro 1,070 million, much lower than the current market value of the
stake according to consensus estimates.
Smartcom: 15% EBITDA growth
The Chilean mobile company Smartcom made a negative contribution
of Euro 3 million to ENDESA's net income in the first quarter of the
year.
Turnover exceeded Euro 50 million, an increase of 17% over the
first three months of 2004 and EBITDA was 15% higher, at Euro 12.5
million.
Smartcom customer base was over 1.6 million at March 31 2005, 31%
more than at the end of 2004.
STATISTICAL APPENDIX
KEY FIGURES
Electricity Generation (GWh) 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Electricity business in Spain and
Portugal 24,506 23,847 2.8
- ----------------------------------------------------------------------
Electricity business in Europe 9,299 5,384 72.7
- ----------------------------------------------------------------------
Electricity business in Latin America 14,558 13,493 7.9
- ----------------------------------------------------------------------
TOTAL 48,363 42,724 13.2
- ----------------------------------------------------------------------
Electricity Generation (GWh) Spain
and Portugal (GWh) 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Mainland 21,153 20,738 2.0
- ----------------------------------------------------------------------
Nuclear 6,385 6,467 -1.3
- ----------------------------------------------------------------------
Coal 9,745 9,165 6.3
- ----------------------------------------------------------------------
Hydroelectric 1,704 2,918 -41.6
- ----------------------------------------------------------------------
Combined cycle - CCGT 1,869 1,461 27.9
- ----------------------------------------------------------------------
Fuel oil 981 277 254.2
- ----------------------------------------------------------------------
Renewables/CHF 469 450 4.2
- ----------------------------------------------------------------------
Non-mainland 3,353 3,109 7.8
- ----------------------------------------------------------------------
TOTAL 24,506 23,847 2.8
- ----------------------------------------------------------------------
Electricity Generation in Europe (GWh) 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Coal 4,740 1,330 256.4
- ----------------------------------------------------------------------
Hydroelectric 685 479 43.0
- ----------------------------------------------------------------------
Combined cycle - CCGT 2,783 1,384 101.1
- ----------------------------------------------------------------------
Fuel oil 1,084 2,191 -50.5
- ----------------------------------------------------------------------
Wind 7 - N/A
- ----------------------------------------------------------------------
TOTAL 9,299 5,384 72.7
- ----------------------------------------------------------------------
Electricity Generation in Latin
America (GWh) 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Chile 4,301 3,953 8.8
- ----------------------------------------------------------------------
Argentina 4,719 4,139 14.0
- ----------------------------------------------------------------------
Peru 1,554 1,258 23.5
- ----------------------------------------------------------------------
Colombia 2,855 2,834 0.7
- ----------------------------------------------------------------------
Brazil 1,129 1,309 -13.8
- ----------------------------------------------------------------------
TOTAL 14,558 13,493 7.9
- ----------------------------------------------------------------------
Electricity sales (GWh) 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Electricity business in Spain and
Portugal 25,290 24,619 2.7
- ----------------------------------------------------------------------
Regulated market 16,595 17,461 -5.0
- ----------------------------------------------------------------------
Deregulated market 8,695 7,158 21.5
- ----------------------------------------------------------------------
Electricity business in Europe 12,971 5,777 124.5
- ----------------------------------------------------------------------
Electricity business in Latin America 13,492 12,948 4.2
- ----------------------------------------------------------------------
Chile 2,823 2,721 3.7
- ----------------------------------------------------------------------
Argentina 3,516 3,439 2.2
- ----------------------------------------------------------------------
Peru 1,102 1,041 5.9
- ----------------------------------------------------------------------
Colombia 2,386 2,357 1.2
- ----------------------------------------------------------------------
Brazil 3,665 3,390 8.1
- ----------------------------------------------------------------------
TOTAL 51,753 43,344 19.4
- ----------------------------------------------------------------------
Gas sales (GWh) 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
Regulated market 1,331 1,192 11.7
- ----------------------------------------------------------------------
Deregulated market 4,570 2,293 99.3
- ----------------------------------------------------------------------
TOTAL 5,901 3,485 69.3
- ----------------------------------------------------------------------
Workforce 31-03-05 31-12-04 % Chg
- ----------------------------------------------------------------------
Electricity business in Spain and
Portugal 12,832 12,889 -0.4
- ----------------------------------------------------------------------
Electricity business in Europe 2,342 2,440 -4.0
- ----------------------------------------------------------------------
Electricity business in Latin America 11,886 11,735 1.3
- ----------------------------------------------------------------------
Other businesses 87 93 -6.5
- ----------------------------------------------------------------------
TOTAL 27,147 27,157 0.0
- ----------------------------------------------------------------------
FINANCIAL DATA
Key figures 1Q 2005 1Q 2004 % Chg
- ----------------------------------------------------------------------
EPS (EUR) 0.53 0.42 27.0
- ----------------------------------------------------------------------
CFPS (EUR) 0.96 0.85 12.2
- ----------------------------------------------------------------------
BVPS (EUR) 8.69 8.12(a) 7.0
- ----------------------------------------------------------------------
Net debt (Euro million) 31-03-05 31-12-04 % Chg
- ----------------------------------------------------------------------
Electricity business in Spain and
Portugal 10,017 9,586 4.5
- ----------------------------------------------------------------------
Electricity business in Europe 1,888 2,123 -11.1
- ----------------------------------------------------------------------
ENDESA Italia 1,317 1,285 2.5
- ----------------------------------------------------------------------
Others 571 838 -31.9
- ----------------------------------------------------------------------
Electricity business in Latin America 5,478 5,350 2.4
- ----------------------------------------------------------------------
ENERSIS 4,198 4,081 2.9
- ----------------------------------------------------------------------
Others 1,280 1,269 0.9
- ----------------------------------------------------------------------
Other businesses 1,673 1,639 2.1
- ----------------------------------------------------------------------
TOTAL 19,056 18,698 1.9
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Gearing (%)(a) 143.7 149.6 N/A
- ----------------------------------------------------------------------
Net debt/operating cash flow (times) 3.2 3.4(b) --
- ----------------------------------------------------------------------
Interest coverage with operating cash
flow (times) 6.5 5.4(b) --
- ----------------------------------------------------------------------
"Rating" (11-05-05) Short
Long term term Outlook
- ----------------------------------------------------------------------
Standard & Poor's A A-1 Negative
- ----------------------------------------------------------------------
Moody's A3 P-2 Estable
- ----------------------------------------------------------------------
Fitch A F1 Estable
- ----------------------------------------------------------------------
Main fixed income issues Spread over IRS (bp)
- ----------------------------------------------------------------------
31-03-05 31-12-04
- ----------------------------------------------------------------------
0.8 Y EUR 750M 5.25% Mat. Feb 2006 8 11
- ----------------------------------------------------------------------
4.1 Y EUR 700M 4.375% Mat. June 2009 23 17
- ----------------------------------------------------------------------
7.2 Y GBP 750M 6.125% Mat. June 2012 40 33
- ----------------------------------------------------------------------
7.8 Y EUR 700M 5.375% Mat. Feb 2013 36 31
- ----------------------------------------------------------------------
Stock market data 31-03-05 31-12-04 % Chg
- ----------------------------------------------------------------------
Market cap (EUR millions) 18,369 18,306 0.3
- ----------------------------------------------------------------------
Number of shares outstanding (million) 1,058.752 1,058.752 --
- ----------------------------------------------------------------------
Nominal share value (EUR) 1.2 1.2 --
- ----------------------------------------------------------------------
Stock market data 2004 2003 % Chg
- ----------------------------------------------------------------------
Trading volumes (shares)
- ----------------------------------------------------------------------
Madrid stock exchange 643,866,930 632,705,040 1.8
- ----------------------------------------------------------------------
NYSE 6,841,400 10,285,600 -33.5
- ----------------------------------------------------------------------
Avg. daily trading volume
(shares)
- ----------------------------------------------------------------------
Madrid stock exchange 10,555,195 10,042,937 5.1
- ----------------------------------------------------------------------
NYSE 112,154 165,897 -32.4
- ----------------------------------------------------------------------
Share price 1Q 2005 1Q 2005
high low 31-03-05 31-12-04
- ----------------------------------------------------------------------
Madrid stock exchange (EUR) 18.05 16.74 17.35 17.29
- ----------------------------------------------------------------------
NYSE (USD) 23.40 21.85 22.59 23.27
- ----------------------------------------------------------------------
Dividends (Euro/s) Payable against 2004 results
- ----------------------------------------------------------------------
Interim dividend(a) 27.20
- ----------------------------------------------------------------------
Final dividend (%)(c) 46.62
- ----------------------------------------------------------------------
Total DPS (%)(c) 73.82
- ----------------------------------------------------------------------
Pay-out (%)(c) 56.7
- ----------------------------------------------------------------------
Dividend yield (%)(c) 4.25
- ----------------------------------------------------------------------
(a) At January 1st, 2005
(b) At March 31st, 2005
(c) Provisional - pending approval at the shareholders' meeting
For additional information please contact David Raya, North
America Investor Relations Office, telephone 212-750-7200.
http://www.endesa.es
CONTACT: ENDESA
North America Investor Relations Office
David Raya, 212-750-7200
http://www.endesa.es
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENDESA, S.A.
Dated: May 11th, 2005 By: /s/ David Raya
__________________________
Name: David Raya
Title: Manager of North America
Investor Relations