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.
-0- *T 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%
--------------------------------------------------------------------
*T 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. -0- *T 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%
---------------------------------------------------------------------
*T 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%).
-0- *T 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%
----------------------------------------------------------------------
*T 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. -0- *T 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
------------------------------------------------------------ *T
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. -0- *T 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
----------------------------------------------------------------------
*T The breakdown of debt by business is as follows: -0- *T 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
----------------------------------------------------------------------
*T 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. -0- *T 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" *T 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. -0- *T 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
----------------------------------------------------------------------
*T 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. -0- *T 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
----------------------------------------------------------------------
*T 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. -0-
*T 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.
----------------------------------------------------------------------
*T 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: -0- *T 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.
----------------------------------------------------------------------
*T EBIT: growth of 44.2% EBITDA and EBIT for the group's European
electricity business can be broken down as follows: -0- *T 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
----------------------------------------------------------------------
*T 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. -0- *T 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
----------------------------------------------------------------------
*T 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: -0- *T 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
----------------------------------------------------------------------
*T 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: -0- *T 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
----------------------------------------------------------------------
*T The following table shows a breakdown of EBITDA and EBIT by
country where ENDESA operates through fully consolidated
subsidiaries. -0- *T 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
----------------------------------------------------------------------
*T 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: -0- *T 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%
-----------------------------------------------------------------
*T 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 -0- *T 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
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Chile 4,301 3,953 8.8
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Argentina 4,719 4,139 14.0
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Peru 1,554 1,258 23.5
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Colombia 2,855 2,834 0.7
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Brazil 1,129 1,309 -13.8
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TOTAL 14,558 13,493 7.9
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Electricity sales (GWh) 1Q 2005 1Q 2004 % Chg
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Electricity business in Spain and Portugal 25,290 24,619 2.7
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Regulated market 16,595 17,461 -5.0
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Deregulated market 8,695 7,158 21.5
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Electricity business in Europe 12,971 5,777 124.5
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Electricity business in Latin America 13,492 12,948 4.2
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Chile 2,823 2,721 3.7
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Argentina 3,516 3,439 2.2
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Peru 1,102 1,041 5.9
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Colombia 2,386 2,357 1.2
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Brazil 3,665 3,390 8.1
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TOTAL 51,753 43,344 19.4
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Gas sales (GWh) 1Q 2005 1Q 2004 % Chg
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Regulated market 1,331 1,192 11.7
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Deregulated market 4,570 2,293 99.3
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TOTAL 5,901 3,485 69.3
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Workforce 31-03-05 31-12-04 % Chg
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Electricity business in Spain and Portugal 12,832 12,889 -0.4
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Electricity business in Europe 2,342 2,440 -4.0
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Electricity business in Latin America 11,886 11,735 1.3
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Other businesses 87 93 -6.5
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TOTAL 27,147 27,157 0.0
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*T FINANCIAL DATA -0- *T Key figures 1Q 2005 1Q 2004 % Chg
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EPS (EUR) 0.53 0.42 27.0
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CFPS (EUR) 0.96 0.85 12.2
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BVPS (EUR) 8.69 8.12(a) 7.0
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Net debt (Euro million) 31-03-05 31-12-04 % Chg
----------------------------------------------------------------------
Electricity business in Spain and Portugal 10,017 9,586 4.5
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Electricity business in Europe 1,888 2,123 -11.1
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ENDESA Italia 1,317 1,285 2.5
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Others 571 838 -31.9
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Electricity business in Latin America 5,478 5,350 2.4
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ENERSIS 4,198 4,081 2.9
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Others 1,280 1,269 0.9
----------------------------------------------------------------------
Other businesses 1,673 1,639 2.1
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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) --
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"Rating" (11-05-05) Short Long term term Outlook
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Standard & Poor's A A-1 Negative
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Moody's A3 P-2 Estable
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Fitch A F1 Estable
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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
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4.1 Y EUR 700M 4.375% Mat. June 2009 23 17
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7.2 Y GBP 750M 6.125% Mat. June 2012 40 33
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7.8 Y EUR 700M 5.375% Mat. Feb 2013 36 31
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Stock market data 31-03-05 31-12-04 % Chg
----------------------------------------------------------------------
Market cap (EUR millions) 18,369 18,306 0.3
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Number of shares outstanding (million) 1,058.752 1,058.752 --
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Nominal share value (EUR) 1.2 1.2 --
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Stock market data 2004 2003 % Chg
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Trading volumes (shares)
----------------------------------------------------------------------
Madrid stock exchange 643,866,930 632,705,040 1.8
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NYSE 6,841,400 10,285,600 -33.5
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Avg. daily trading volume (shares)
----------------------------------------------------------------------
Madrid stock exchange 10,555,195 10,042,937 5.1
----------------------------------------------------------------------
NYSE 112,154 165,897 -32.4
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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
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NYSE (USD) 23.40 21.85 22.59 23.27
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Dividends (Euro/s) Payable against 2004 results
----------------------------------------------------------------------
Interim dividend(a) 27.20
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Final dividend (%)(c) 46.62
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Total DPS (%)(c) 73.82
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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 *T For additional
information please contact David Raya, North America Investor
Relations Office, telephone 212-750-7200. http://www.endesa.es
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