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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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ENDESA, S.A.
(Name of Subject Company)
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ENDESA, S.A.
(Name of Person(s) Filing Statement)
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Ordinary shares, nominal value (euro)1.20 each
American Depositary Shares, each representing the
right to receive one ordinary share
(Title of Class of Securities)
00029274F1
(CUSIP Number of Class of Securities)
Alvaro Perez de Lema
Authorized Representative of Endesa, S.A.
410 Park Avenue, Suite 410
New York, NY 10022
(212) 750-7200
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
With a Copy to:
Sergio J. Galvis, Richard A. Pollack, Angel L. Saad
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
1 (212) 558-4000
Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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IMPORTANT LEGAL INFORMATION
The following document was made available to shareholdersof Endesa, S.A.
(the "Company" or "Endesa") on October 31st, 2005. Endesa shareholders are urged
to read Endesa's Solicitation/Recommendation Statement on Schedule 14D-9 when it
is filed by the Company with the U.S. Securities and Exchange Commission (the
"SEC"), as it will contain important information. The
Solicitation/Recommendation Statement and other public filings made from time to
time by the Company with the SEC are available without charge from the SEC's
website at www.sec.gov and at the Company's principal executive offices in
Madrid, Spain.
Statements in this document other than factual or historical information are
"forward-looking statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements regarding Endesa's
anticipated financial and operating results and statistics are not guarantees of
future performance and are subject to material risks, uncertainties, changes and
other factors which may be beyond Endesa's control or may be difficult to
predict.
Forward-looking statements could include, but are not limited to, statements
regarding: (1) estimated future earnings; (2) anticipated increases in wind and
CCGTs generation and market share; (3) expected increases in demand for gas and
gas sourcing; (4) management strategy and goals; (5) estimated cost reductions
and increased efficiency; (6) anticipated developments affecting tariffs,
pricing structures and other regulatory matters; (7) anticipated growth in
Italy, France and elsewhere in Europe; (8) estimated capital expenditures and
other investments; (9) expected asset disposals; (10) estimated increases in
capacity and output and changes in capacity mix; (11) repowering of capacity;
and (12) macroeconomic conditions. For all of these-forward looking statements,
Endesa claims the protection of the safe harbor for forward-looking statements
contained in the U.S. Private Securities Litigation Reform Act of 1995. Endesa
disclaims any obligation to revise or update any forward-looking statements in
this document.
The following important factors, in addition to those discussed elsewhere in
this document, could cause actual financial and operating results and statistics
to differ materially from those expressed in our forward-looking statements:
o Economic and Industry Conditions: materially adverse changes in
economic or industry conditions generally or in our markets; the
effect of existing regulations and regulatory changes; tariff
reductions; the impact of any fluctuations in interest rates; the
impact of fluctuations in exchange rates; natural disasters; the
impact of more stringent environmental regulations and the inherent
environmental risks relating to our business operations; and the
potential liabilities relating to our nuclear facilities.
o Transaction or Commercial Factors: any delays in or failure to obtain
necessary regulatory, antitrust and other approvals for our proposed
acquisitions or asset disposals, or any conditions imposed in
connection with such approvals; our ability to integrate acquired
businesses successfully; the challenges inherent in diverting
management's focus and resources from other strategic opportunities
and from operational matters during the process of integrating
acquired businesses; the outcome of any negotiations with partners and
governments; any delays in or failure to obtain necessary regulatory
approvals (including environmental) to construct new facilities or
repower or enhance our existing facilities; shortages or changes in
the price of equipment, materials or labor; opposition of political
and ethnic groups; adverse changes in the political and regulatory
environment in the countries where we and our related companies
operate; adverse weather conditions, which may delay the completion of
power plants or substations, or natural disasters, accidents or other
unforeseen events; and the inability to obtain financing at rates that
are satisfactory to us.
o Political/Governmental Factors: political conditions in Latin America
and changes in Spanish, European and foreign laws, regulations and
taxes.
o Operating Factors: technical difficulties; changes in operating
conditions and costs; the ability to implement cost reduction plans;
the ability to maintain a stable supply of coal, fuel and gas and the
impact of fluctuations on fuel and gas prices; acquisitions or
restructurings; and the ability to implement an international and
diversification strategy successfully.
o Competitive Factors: the actions of competitors; changes in
competition and pricing environments; the entry of new competitors in
our markets.
[LOGO]
CLARIFICATIONS BY ENDESA WITH RESPECT TO CERTAIN STATEMENTS OF GAS NATURAL
New York, 31 October 2005.- Gas Natural, in an attempt to prevent by any means
possible that the business combination resulting from its hostile tender offer
for ENDESA (NYSE:ELE) be examined by the appropriate Regulator under European
and Spanish legislation, has once again made statements that could create
confusion in market.
We would like to point out that as Gas Natural plans to pay for a large portion
of ENDESA's stock with its own shares, clarifications as to how the transaction
will be carried out and, more importantly, that the appropriate regulator is
assigned to study the resulting concentration and establish the conditions under
which it may, or may not, proceed are important factors in clarifying the
expectations of the shareholders and achieving the greatest possible certainty
for the transaction.
Against this backdrop, Gas Natural is demonstrating a high level of anxiety,
caused largely by evidence of the market's rejection of the bid, and the
statement issued by La Caixa (the utility's controlling shareholder) on October
13, expressing the bank's wish to distance itself from the transaction launched
by its affiliate, even denying, against all evidence to the contrary and
repudiating explanations made earlier to the market regulators, that the bank
exercises, or has ever exercised, control over Gas Natural.
In this regard, we would the highlight considerable and convenient lack of
knowledge that Gas Natural professes in its statements regarding the whole
transaction, expressing surprise that ENDESA has now reclassified Euro 1.5bn
issued as preferred shares as debt, impacting minorities interest, when in fact
this information has been on file with the Spanish regulator (CMNV) since April
5.
The same applies to ENDESA's reported revenues for 2004. Gas Natural is now
"shocked" that, under IFRS, revenues are Euro 4 billion lower, when this
information is in the public domain and has been since it was reported to the
CMNV on April 5 2005.
It is also worth mentioning that ENDESA reported its first half results for
2005, i.e. months before the hostile bid was launched, using the same criteria
for revenues based on which it has reported to the EU the impact of the IFRS on
its 2004 financial statement.
In any case, given Gas Natural's repetitive use of confusing information, ENDESA
would like to make the following points clear:
European regulations on merger concentrations state that it is most appropriate
to use financial information for the full year ended on the date before the
tender offer was launched, i.e. September 4, for purposes of calculating the
appropriate revenue figure. As this is not possible, European regulations on
merger concentrations consider that the next best method is, under normal
conditions, to use the financial statements of the previous fiscal year,
adjusted to reflect the Company's position at the date the tender offer is made.
If the financial information had been prepared the day before the tender offer
was launched, i.e. September 4 2005, the accounts would have been prepared using
IFRS, the accounting criteria valid at that date and the only criteria used by
listed Spanish companies, including ENDESA, to report consolidated figures for
2005. First half results for 2005, published prior to the tender offer, were
reported by ENDESA under IFRS.
ENDESA is obliged to present its 2004 financial statements in accordance with
IFRS. Accordingly, this information was prepared and filed with the CNMV on
April 5 2005, 5 months before the tender offer was launched, and has been
available on the regulator's web site since that date. The information was
therefore in the public domain and could be accessed by any interested party. It
is therefore surprising that Gas Natural did not become aware of this fact when
preparing the tender offer, more so considering that the Group will have to
report using the same accounting standards in the unlikely event that the
hostile bid has the results it expects.
Revenues under IFRS are over Euro 4 billion lower than under former Spanish GAAP
due to the application of the IFRS' principle of "substance over form".
This accounting principle means that income generated by subsidiaries on behalf
of third parties which do not generate value for the company can no longer be
booked as revenue. Furthermore, income from sales made to the Spanish
electricity market operator, OMEL, which overlap with purchases made by the same
group of companies in the same market, time interval and at the same price can
no longer be booked as revenues as to do so would produce two streams of income
from the same energy generated: income from sales to the wholesale market and
income from sales to the end customer.
ENDESA applied the adjustments necessary to convert its financial statement to
IFRS and published its 2004 financial statements under IFRS on April 5 2005
which were duly registered with the CNMV. An explanation of the differences
between Spanish GAAP and IFRS were included in the Registration Document filed
with the CNMV on July 7 2005 and in the Form 20-F filed with the SEC on June 30
2005 and are reflected in the financial statements for the first and second
quarters of 2005 published by ENDESA under IFRS. Furthermore, these accounting
standards in accordance with IFRS have been passed on externally in four
separate reports issued by prestigious accounting experts in IFRS and auditing
firms.
Therefore, adjustments between Spanish GAAP and IFRS have been applied
consistently in ENDESA's published information, and ENDESA has maintained an
extremely coherent position over time..
ENDESA has explained these adjustments as differences between Spanish GAAP and
IFRS in all its communications, including the Form 20-F registered with the SEC
on June 30 2005. However, an explanation of the adjustments was never referred
to as a difference between Spanish accounting principles and US GAAP. Although
this in no way affects the information submitted to the European Commission for
the purposes of calculating turnover in accordance with Community regulation on
merger concentrations, ENDESA wishes to state that it filed an amendment to the
Form 20-F filed with the SEC, reflecting all adjustments . This amendment does
not result in any change to either the net profit or shareholders' equity
calculated under US GAAP nor does it affect ENDESA's financial statements
prepared in accordance with Spanish GAAP or IFRS, as filed with the CNMV on 5
April 2005, with the sole exception of an additional insignificant reduction of
Euro 111 million in both revenues and operating costs, with no effect on the
results.
Current European regulations governing concentration undertakings require
certain adjustments to be made to the revenue figure to define the true economic
value of the companies involved in the transaction on the date it is effected.
ENDESA, in compliance with this legislation, has made 6 adjustments (and not 30
as suggested by Gas Natural) which do not modify accounting procedures but
rather adjust the audited figures to reflect the European Commission's criteria
for merger concentrations, where these differ from effective accounting
standards. The adjustments include:
The impact of changes in the Group's composition between the 2004 financial
statements and date the tender offer was launched, in order to reflect the
Group's updated structure as of the bid date.
Deduction of subsidies accounted for as income, but which are for the purpose of
promoting activities other than the company's core business, in this case the
extraction of national coal.
Elimination of income corresponding to previous fiscal years which had not been
registered due to the company's inability to quantify said amount (compensation
related to non-Peninsular activity corresponding to 2001 - 2003).
Adding back revenues generated for the period but written off in accordance with
prudential accounting criteria (ENDESA Italia).
Deduction of taxes which, although booked as expenses, are directly linked to
sales (public thoroughfare levies).
The following table quantifies the adjustments made:
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Spain Other Total
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EU
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1. Revenue adjustment to reflect company acquisitions and disposals (3) 564 561
2. Subsidy adjustments (143) -- (143)
3. Income from previous fiscal years (51) -- (51)
4. Additional revenue generated at ENDESA Italia -- 199 199
5. Deduction of discounts and taxes (104) -- (104)
6. Revenues from equity accounted investments 171 104 275
TOTAL (130) 867 737
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Figures in millions of Euros
The figures presented by ENDESA to the European Commission represent the sole
source of information for revenue calculation purposes in accordance with the
Commission's mergers concentration criteria and have been reviewed by external
auditors.
Spanish revenues calculated in accordance with the aforementioned Community
criteria for merger concentrations account for 64% of ENDESA's revenues
generated within the European Community. This figure determines the European
dimension of the tender offer launched by Gas Natural for ENDESA.
In any event, ENDESA reserves the right to take appropriate legal action to hold
Gas Natural responsible for any liability it may incur as a result of its
statements.