ENDESA (NYSE:ELE): EBITDA GROWTH REFLECTS A POSITIVE PERFORMANCE OF
ENDESA�S BUSINESSES EBITDA stood at Euro 2,000 million in the first
quarter of the year, an increase of 15.3% on a like-for-like basis
and 2.7% vs. last year�s reported amount during 1Q06. BALANCED
CONTRIBUTION FROM ALL BUSINESSES TO TOTAL INCOME The Spanish and
Portuguese business posted net income of Euro 437 million, an
increase of 22.8% measured on a like-for-like basis, that is,
excluding stranded costs recognition for non-mainland systems for
2001-2005 that was recorded in the first quarter of 2006. This
business accounted for 69% of ENDESA�s total net income. Net income
from business in Europe decreased 15.3% to Euro 100 million, as a
result of special market conditions in the first quarter of the
year. This division accounted for 15.8% of ENDESA�s total net
income. In Latin America, net income rose 2.1% on a like-for-like
basis from the first quarter of 2006, to Euro 96 million euros.
This accounted for 15.2% of ENDESA�s total net income. RESULTS AT
THE COMPANY'S THREE BUSINESSES IN LINE WITH FORECASTS PROVIDED TO
THE MARKET KEY FACTS AND FIGURES FOR 1Q07 POSITIVE PERFORMANCE OF
NET INCOME ON A LIKE-FOR-LIKE BASIS ENDESA reports first-quarter
2007 net income of Euro 633 million. This is almost entirely
recurrent, since it does not include one-off or atypical items of
any significant amount. Conversely, net income in first-quarter
2006 was affected by a number of sizeable, one-off items, totalling
Euro 484 million: -- Recognition of stranded costs for non-mainland
generation for 2001-2005, which amounted to Euro 212 million, and
of interest, which amounted to Euro 31 million, with a combined
impact of Euro 212 million on net income. -- Fiscal impact of the
merger between Elesur and Chilectra, which was Euro 170 million,
with an impact on net income after minority interests of Euro 101
million. -- Net capital gain from sale of 5.01% of Auna to Deutsche
Bank, with a net impact on earnings of Euro 171 million.
Like-for-like growth in net income in 1Q07 was 11.4% vs. 1Q06.
POSITIVE RESULTS ACROSS ALL BUSINESSES Net income in Spain and
Portugal rose 22.8% on a like-for-like basis, to Euro 437 million,
from the first quarter of 2006. Net income from business in Europe
was Euro 100 million, a decrease of 15.3% from the first quarter of
2006, mainly as a result of the impact of weather conditions on
market performance in Italy and France. Net income from Latin
American business climbed 2.1% on a like-for-like basis, to Euro 96
million. GROWTH IN MAIN INCOME STATEMENT ITEMS ON A LIKE-FOR-LIKE
BASIS REFLECTS POSITIVE PERFORMANCE OF BUSINESSES Gross margin was
Euro 2,820 million in the first quarter of 2007, 11.8% higher than
the same period of 2006, on a like-for-like basis. EBITDA was Euro
2,000 million, an increase of 15.3% on a like-for-like basis. EBIT
was Euro 1,443 million, a 12.8% increase on a like-for-like basis.
Cash flow from operations totalled Euro 1,312 million, 20.7% higher
than in 1Q06 on a like-for-like basis. ENDESA�s total electricity
output was 47,295 GWh in 1Q07, 5.5% lower than in the same period a
year earlier, as sharp output increases in several Latin American
countries were not enough to offset declines in Spain and the rest
of Europe. Total electricity sales rose 0.2% from first quarter of
2006, to 56,841 GWh. LEVERAGE RATIO IN LINE WITH STRATEGIC PLAN
TARGET Leverage stood at 124.3% as of 31 March, 2007, compared with
124.5% on 31 December, 2006, in line with targets set down in the
Company's Strategic Plan, which calls for leverage not to exceed
140%. BUSINESS IN SPAIN AND PORTUGAL Positive performance of main
income statement items Net income from business in Spain and
Portugal was Euro 437 million, accounting for 69% of ENDESA's total
income. On a like-for-like basis, excluding the impact of
recognition of stranded costs for non-mainland generation for
2001-2005, booked in 1Q06, net income at this business rose 22.8%.
EBITDA rose 24.5% from a year earlier to Euro 1,027 million, and
EBIT climbed by 21.9% to Euro 684 million both measured on a
like-for-like basis. Mainland generation mix reasserts its
competitiveness ENDESA, among Spanish utilities, maintains the
largest market share of ordinary regime output (34.6% in 1Q07),
liberalized market (55.6% in 1Q07) and total sales to final
customers (42.8% in 1Q07). In the first quarter, the Company met
80.8% of its Spanish demand using its own power stations. This
balance between generation and demand gives ENDESA a clear
competitive advantage over its competitors, thanks to its lower
exposure to risks arising from changes in rainfall patterns and
fluctuations in wholesale prices. Nuclear and hydro powered energy
comprised 45.9% of ENDESA's mainland generation mix, compared with
43.4% for the rest of the sector. ENDESA�s mainland coal-fired
plants achieved a 73.3% load factor in the first quarter of 2007,
making a significant contribution to covering demand in the Spanish
electricity system. ENDESA: top investor in electricity facilities
in the Spanish electricity sector ENDESA invested Euro 417 million
in Spain and Portugal in 1Q07, of which Euro 366 million, or 87.8%,
was capex. This underscores ENDESA�s status as the largest investor
in electricity facilities among Spanish power companies. Euro 229
million of capex was spent on upgrading distribution assets to
enhance quality and security of supply. Sharp growth in generation
from cogeneration and renewable energies +33.8% Renewable and CHP
companies fully consolidated by ENDESA generated 823 GWh in the
first quarter, an increase of 33.8% from the same period in 2006.
The gross margin at these companies was Euro 65 million, an
increase of 4.8% from 1Q06. Larger contribution to results from the
distribution activity EBITDA in the distribution business rose Euro
131 million or 55.7% from the same period last year. This increase
was mainly the result of the increase in remuneration stipulated in
the Royal Decree governing tariffs in 2007 and operational
improvements achieved in this activity, above all through
initiatives to reduce losses and lower fixed costs. Higher earnings
in this activity have come alongside a 37% improvement in the
quality of supply over the last 12 months. Supply business
optimization ENDESA in the first quarter sold 51% of its output in
the deregulated market, in which prices rose 20.7%, while the rest
of the sector sold only 16% of output in the deregulated market.
This demonstrates that the Company's supply strategy gives,
comparatively to peers, greater coverage against fluctuations in
wholesale market prices. Fuel consumption and CO2 costs fall 12.5%
and 85% respectively Fuel consumption at ENDESA's business in Spain
and Portugal amounted to Euro 492 million in the first quarter, a
decrease of 12.5% from the same period in 2006. This decrease was
due to declining fuel procurement costs, and, to a lesser extent,
to lower output in the period. As for CO2, emissions from mainland
output were 10.5% lower. Cost was also 85% lower, totalling Euro 6
million in 1Q07 vs. Euro 40 million in 1Q06. ENDESA: A major player
in natural gas ENDESA sold a total of 9,013 GWh in the Spanish
natural gas market in the first quarter of 2007, 26.2% more than in
the same period a year earlier. Liberalized market share stood at
13.1%. Natural gas business added Euro 64 million to the gross
margin in the first quarter of 2007, an increase of 128.6% from the
same period a year earlier. BUSINESS IN EUROPE Significant
contribution to total net income from the business in Europe Net
income from the electricity business in Europe was Euro 100 million
in the first quarter, accounting for 15.8% of ENDESA's total net
income, and decreasing 15.3% from the same period a year earlier.
Stripping out the effect from the cancellation of Delibera 254,
made during 1Q06, total net income would have decreased just by
3.8%. EBITDA at this business was Euro 310 million, 15.5% of total
EBITDA at ENDESA, and a decrease of 3.7% from a year earlier.
Without the Delibera 254 effect, EBITDA increased 4.7% vs. 1Q06.
ENDESA enters the Greek market On 28 March Endesa Europe signed a
strategic alliance with Greek metallurgy and engineering company
Mytilineos Holdings S.A. to operate in the Greek market with an
option to expand into other markets in southeast Europe. The
alliance will take the form of a joint venture, in which ENDESA
will hold a 50.01% stake. Mytilineos will contribute to this joint
venture with all its energy assets (thermal and renewable) as well
as its current licenses and Endesa will supply Euro 485 million
and, depending on the success of wind projects currently waiting
for authorization, an additional fee up to Euro 115 million. The
new company will become the largest independent energy operator in
Greece and will have the largest order book of projects under
construction and in development in the country, as well as a
generation mix balanced between thermal and renewable capacity.
Italy: Significant progress on new facilities In the framework of
its strategy for growth in renewable energies, Endesa Italia in
February incorporated into its generation mix the wind farms Piano
di Corda and Serra Pelata, with 122 MW of total capacity,
completing an agreement with Gamesa signed three years ago for the
acquisition of wind assets in Italy. Construction continued as
scheduled on the two 400MW CCGTs at the Scandale plant (Calabria),
in which ENDESA Europa owns 50%, as did preliminary work on the
offshore regasification terminal off Livorno, which is scheduled to
come on-stream on 2009. Endesa Italia paid shareholders a dividend
of Euro 216 million in 1Q07, of which Euro 173 million corresponded
to Endesa Europa. ENDESA's electricity output in Italy was 6,354
GWh in 1Q07, a drop of 16.6% from the same period a year earlier,
as a result of weather conditions in that market. France: Growth in
Snet�s main income statement items French ENDESA�s generator
contributed Euro 60 million to European business EBITDA and Euro 34
million to EBIT in 1Q07, with growth of 7.1% and 17.2%,
respectively. Its electricity output was 2,258 GWh, a decrease of
47.8% from the first three months of 2006, mainly as a result of
lower electricity demand in France due to climate conditions and
higher rainfall in the country, which gave rise to lower usage of
thermal plants. Total sales were 4,653 GWh, a decrease of just
22.9% due to higher energy purchases. Snet paid shareholders
dividends of Euro 33 million in 1Q07, of which Euro 21 million
corresponded to Endesa Europa. Debt at the business in Europe falls
by Euro 65 million Net financial debt at ENDESA�s electricity
business in Europe stood at Euro 1,609 million at 31 March 2007,
compared with Euro 1,674 million at the end of 2006, a drop of Euro
65 million or 3.9%. BUSINESS IN LATIN AMERICA Growth in total
EBITDA (+12.8%) and EBIT (+16.1%) confirm progress of this business
Net income at ENDESA�s Latin American business totalled Euro 96
million in 1Q07, 2.1% more than a year earlier, after discounting
from 1Q06 the one-off tax impact arising from the merger of Elesur
and Chilectra, for a contribution of 15.2% to ENDESA's total net
income. EBITDA rose 12.8% to Euro 663 million from a year earlier,
and EBIT climbed 16.1% to Euro 535 million. Measured in local
currencies, EBITDA rose 21.8% and EBIT climbed 25.6%, both vs.
1Q06. EBITDA and EBIT increased in both the generation and
transmission businesses (+4% and +4.4%, respectively) and in
distribution (+26% and 32.9%, respectively). In just the generation
business increases in EBITDA and EBIT were 8.4% and 9.5%
respectively. Growth in sales and significant operating
improvements Total sales from ENDESA�s Latin American companies
increased by 6.3%, to 15,268 GWh in the first quarter, driven by
organic growth in their markets, and reflecting the ongoing
economic recovery in the markets in which they operate. Generation
margin stood at USD 29.7/MWh, an increase of 14.9% compared to
1Q06, and distribution margin stood at USD 39.2 /MWh, an increase
of 12.6%. Energy distribution losses were 11.1% in 1Q07, an
improvement of 0.2 percentage points from the same period in 2006.
Regulatory update: ratification of increase in Edesur�s tariffs In
the first quarter of 2007, the first distribution tariff increase
to be approved in Argentina since the 2001 economic crisis took
effect, after the corresponding resolution was published by the
electricity sector regulator (ENRE). Application of this increase,
which is to be implemented retroactively to November 2005,
contributed to an increase of 144% in Edesur's EBITDA, to Euro 61
million in the first quarter. Cash returns in line with Strategic
Plan targets Cash returns from ENDESA�s Latin American business to
the parent company in the first three months of the year totalled
Euro 118 million. This, coupled with the USD561 million achieved in
2005 and 2006, means that 42.4% of the target in the Strategic Plan
to 2009 (USD 1,600 million) has now been achieved. New capacity
development and investments In Chile, work continued on the
construction of the 377 MW San Isidro II CCGT, of which 246 MW came
on stream last 30th of April, and of the 32 MW Palmucho hydro
plant. The financial investments during 1Q07 include acquisitions
by Endesa Chile in February and March of third-party stakes in
Costanera (5.5%), Hidroinvest (25%) and Hidroel�ctrica El Choc�n
(2.48%). PROPOSED DIVIDEND FOR 2006 The Company�s Board of
Directors has decided that the total gross dividend for 2006 which
it will propose to shareholders at the General Shareholders Meeting
will be Euro 1.64 per share, for a total of Euro 1,736 million.
After payment of an interim dividend of Euro 0.50 per share on 2
January 2007, upon approval of this proposal, the final dividend
will climb to Euro 1.14 per share. CONSOLIDATED RESULTS ENDESA
reports 1Q07 net income of Euro 633 million ENDESA posted net
income of Euro 633 million in the first quarter of 2007. This
amount is Euro 419 million less than the figure registered in the
same period of 2006. However, in order to give a comparison in
like-for-like terms, it is necessary to keep in mind that in
January-March 2006, three non-recurrent effects involving
significant amounts were included: Recognition of stranded costs
for non-mainland generation for 2001-2005, which amounted to Euro
212 million, and of interest, which amounted to Euro 31 million,
with a combined impact of Euro 212 million on net income. Fiscal
impact of the merger between Elesur and Chilectra, which was Euro
170 million, with an impact on net income after minority interests
of Euro 101 million. Net capital gain from sale of 5.01% of Auna to
Deutsche Bank, with a net impact on earnings of Euro 171 million.
Meanwhile, 1Q07 net income was almost entirely recurrent, since it
did not include one-off or atypical items of any significant
amount. After discounting the three effects mentioned above from
first quarter 2006 earnings, net income in 1Q07 rose 11.4%.
References to a like-for-like comparison of earnings in this
document always refer to variations produced after deducting the
three items mentioned above from the first quarter of 2006. ENDESA
FIRST QUARTER 2007 CONSOLIDATED RESULTS � � Euro million � % Chg
vs. 1Q06 � % Chg vs. 1Q06 l-f-l � % Contrib. to earnings Spain and
Portugal � 437� � (23.1) � 22.8� � 69.0� Europe � 100� � (15.3) �
(15.3) � 15.8� Latin America � 96� � (50.8) � 2.1� � 15.2� TOTAL �
633� � (39.8) � 11.4� � 100.0� The distribution of net income
between the different electricity businesses is balanced,
reinforcing the Company�s multinational character and its
appropriately diversified risk profile. Decrease in output (-5.5%)
due mainly to climatic factors Electricity generation fell 5.5%
from the first quarter of 2006 due mainly to the fact that output
increases in several Latin American countries were not sufficient
to offset a decline caused by weather and rainfall conditions in
European markets. Electricity sales totalled 56,841 GWh, an
increase of 0.2% from the same period in 2006. GENERATION AND
ELECTRICITY SALES � � Output � Sales � � GWh � % chg vs. 1Q06 � GWh
� % chg vs. 1Q06 Spain and Portugal � 22,972� � (2.1) � 28,419� �
4.8� Europe � 8,612� � (27.9) � 13,154� � (13.7) Latin America �
15,711� � 7.2� � 15,268� � 6.3� TOTAL � 47,295� � (5.5) � 56,841� �
0.2� Output/sales balance In 1Q07 ENDESA covered 83.2% of its total
electricity sales in all of its markets with electricity generated
by its own plants. This balanced situation between production and
demand allows the Company to considerably reduce risk of its
electricity business, giving it significant competitive advantage
which is especially noteworthy in the Spanish market. In Spain, the
Company covered 80.8% of demand in the period with its own output.
Increase in gross margin (+11.8%) and EBITDA (+15.3%) on a
like-for-like basis Revenues were Euro 5,207 million in the first
quarter, 4.6% lower on a like-for-like basis from the same period
in 2006. This decrease was due to the lower output mentioned
earlier, to lower prices in European wholesale markets, and, above
all, to a lower value for revenues registered for greenhouse gas
emission rights allocated, free of charge, as a consequence of
their price performance. Variable costs fell 18.7% thanks to lower
costs for fuel and greenhouse gas emission rights, declines derived
in both cases mainly from reductions in their respective prices.
The performance of revenues and variable costs produced an increase
of 11.8% in gross margin on a like-for-like basis, to Euro 2,820
million. EBITDA was Euro 2.000 million and EBIT was Euro 1,443
million, increases of 15.3% and 12.8%, respectively, measured on a
like-by-like basis. � � Gross profit � EBITDA � EBIT � � Euro
million � % chg vs. 1Q06 (l-f-l) � Euro million � % chg vs. 1Q06
(l-f-l) � Euro million � % chg vs. 1Q06 (l-f-l) Spain and Portugal
� 1,515� � 15.2� � 1,027� � 24.5� � 684� � 21.9� Europe � 398� �
(2.2) � 310� � (3.7) � 224� � (12.8) Latin America � 907� � 13.4� �
663� � 12.8� � 535� � 16.1� TOTAL � 2,820� � 11.8� � 2,000� � 15.3�
� 1,443� � 12.8� Net financial expenses: -10.3% in like-for-like
terms ENDESA reported negative financial results of Euro 229
million for 1Q07, a 7% increase over the same period in 2006. Net
financial expenses stood at Euro 236 million, or Euro 4 million
more than the figure recorded in the first quarter of 2006.
Measured on a like-for-like basis, they dropped 10.3%. Net
financial expenses for the first quarter of 2007 were reduced by
Euro 50 million as a consequence of the higher interest rate used
to calculate real value of contingencies related to workforce
reduction programmes, which were recorded as provisions - compared
with the rate used for this calculation at the end of 2006. The
difference is due to a rise in interest rates in the market. Cash
flow from operating activities: Growth of 20.7% on a like-for-like
basis Cash flow from operations stood at Euro 1,312 million in the
first quarter, an increase of 1% from a year earlier. Measured on a
like-for-like basis the increase was 20.7%. CASH FLOW FROM
OPERATING ACTIVITIES � � Euro million � %chg vs. 1Q06 (l-f-l) Spain
and Portugal � 667� � 29.3� Europe � 227� � 9.1� Latin America �
418� � 15.2� TOTAL � 1,312� � 20.7� Investments: Euro 761 million.
54.8% in Spain and Portugal ENDESA invested a total of Euro 761
million in the first quarter of 2007. Of this figure, Euro 567
million was invested in capex and intangible assets and the
remaining Euro 194 million in financial investments. INVESTMENTS
Euro million Capex and intangible assets � Financial � TOTAL Spain
and Portugal 379� � 38� � 417� Europe 36� � 27� � 63� Latin America
152� � 129� � 281� TOTAL 567� � 194� � 761� Financial situation
ENDESA�s net debt was Euro 20,556 million as of March 31, 2007,
3.6% higher than at year-end 2006. BREAKDOWN BY BUSINESS LINE OF
ENDESA�S NET DEBT � � Euro million � � � � 31-03-07� � 31-12-06� �
Change � % Chg Business in Spain and Portugal � 13,252� � 12,548� �
704� � 5.6� Business in Europe -Endesa Italia -Other � 1,609 806
803� � 1,674 748 926� � (65) 58 (123)� � (3.9) 7.8 (13.3)� Business
in Latin America - Enersis Group -Other � 5,695 4,864 831� � 5,618
4,749 869� � 77 115 (38)� � 1.4 2.4 (4.4)� TOTAL � 20,556� �
19,840� � 716� � 3.6� When assessing ENDESA�s debt level, it must
be remembered that at 31 March, 2007. ENDESA had the recognised
right to collect Euro 2,813 million in connection with several
regulatory matters: Euro 1,354 million for financing the revenue
shortfall from regulated activities in Spain, Euro 1,449 million in
compensation for stranded costs in non-mainland generation also in
Spain and Euro 10 million for stranded costs in Italy. Stripping
out these regulatory items, ENDESA�s net debt at the end of March
2007 was Euro 17,743 million. The average cost of ENDESA�s total
debt was 5.63% in 1Q07, while the cost of the debt corresponding to
the Enersis Group was an average 9.25%. Stripping out Enersis Group
debt, the average cost of ENDESA�s debt was 4.36%. STRUCTURE OF
ENDESA�S NET DEBT � � ENDESA and direct subsidiaries � Group
Enersis � Total ENDESA Group � � Euro million � % of total � Euro
million � % of total � Euro million � % of total Euro � 15,620� �
100� � -� � -� � 15,620� � 76� Dollar � 72� � -� � 2,195� � 45� �
2,267� � 11� Other currencies � -� � -� � 2,669� � 55� � 2,669� �
13� TOTAL � 15,692� � 100� � 4,864� � 100� � 20,556� � 100� Fixed
rate � 7,397� � 47� � 3,688� � 76� � 11,085� � 54� Hedged � 1,722�
� 11� � 244� � 5� � 1,966� � 10� Floating � 6,573� � 42� � 932� �
19� � 7,505� � 36� TOTAL � 15,692� � 100� � 4,864� � 100� � 20,556�
� 100� Avg. life (years) � 5.0� � 5.3� � 5.1� The average life of
the ENDESA Group�s debt at March 31, 2007 was 5.1 years. ENDESA
enjoys a high degree of protection against interest-rate risk,
since 64% of all its debt is either fixed-rate or hedged. If we
include net debt of regulatory assets to be recouped as part of
electricity regulation, the percentage of debt that is either fixed
rate or hedged climbs to 74% of the total. At 31 March 2007, ENDESA
in Spain and its direct subsidiaries, excluding the Enersis Group,
had liquidity of Euro 6,245 million, of which Euro 5,897 million
corresponded to undrawn sums on unconditional credit lines. This
liquidity is sufficient to cover maturities falling due in the next
17 months for this group of companies. The Enersis Group held cash
and cash equivalents totalling Euro 760 million and Euro 535
million in undrawn, unconditional credit lines, covering debt
maturities for the next 19 months. As of the date of release of
first quarter earnings, ENDESA�s long-term debt ratings are:
Standard & Poor's: A. Moody�s: A3, and Fitch: A+, all of them
under review for a possible downgrade as a result of the takeover
bid for 100% of the Company. Total equity Euro 16,533 million
ENDESA�s total equity was Euro 16,533 million as of 31 March, 2007,
Euro 597 million more than on 31 December, 2006. Of this total
equity, Euro 11,828 million belonged to ENDESA S.A. shareholders,
and Euro 4,705 million to minority shareholders of Group companies.
Total equity corresponding to ENDESA S.A. shareholders increased by
Euro 537 million from 31 December, 2006 as a result of net income
in the quarter of Euro 633 million, of revenues and expenses
recognised in equity, with a net positive effect of Euro 52
million, and of a decrease caused by the distribution to
shareholders of a bonus for attendance at the Extraordinary General
Shareholders Meeting which was planned for 20 March, 2007 and which
totalled Euro 148 million. Financial leverage The positive
performance of the Group's total equity allowed it to offset an
increase of Euro 716 million in net debt, and position ENDESA�s
leverage at 124.3% on 31 March, 2007, as compared to 124.5% on 31
December, 2006. Financial leverage is in line with targets set out
in the Company's Strategic Plan, which calls for leverage not to
exceed 140%. Shareholder remuneration ENDESA�s Board of Directors
agreed to propose at the Company�s General Shareholders Meeting a
dividend payment of Euro 1.64 per share against 2006 earnings, for
a total of Euro 1,736 million. After payment on 2 January, 2007 of
an interim dividend of Euro 0.50 per share, upon approval of this
proposal, the final dividend will climb to Euro 1.14 per share. In
addition, ENDESA distributed an attendance bonus of Euro 0.15 per
share in 1Q07, or additional compensation of Euro 148 million, for
attendance at the Extraordinary General Shareholders Meeting,
scheduled for 20 March, 2007. In the event that the Shareholders
Meeting approves payment of the total 2006 dividend mentioned
above, ENDESA will have distributed to shareholders in 2005 and
2006 a combined total of Euro 4,425 million, or 44.7% of the Euro
9,900 million it has pledged to distribute in dividends in the
period 2005-2009. STRATEGIC PLAN Recurrent income obtained by
ENDESA in the first three months was in line with targets set out
in its Strategic Plan. This Plan was announced to the markets in
October 2005, and it is worth recalling that, since its
implementation, the Company has not only met, but exceeded, the
targets laid out for performance of its key economic variables, as
a consequence of the excellent performance among its businesses and
a favourable macroeconomic and industry context. This has led to
successive Plan updates, which have extended the scope of the
targets established. Strategic objectives The last Plan update,
reported to financial markets on 24 January, foresees meeting the
following targets in 2006-2009: Average compound annual EBITDA
growth of 8%, to Euro 8,500 million in 2009. Average compound
growth of 5% in profits, to Euro 3,075 million in 2009, bringing
ordinary profit to about Euro 3,000 million. Payment to
shareholders totalling Euro 9,900 million in dividends over the
period 2005-2009. Of this amount, Euro 7,600 million will be
comprised of dividends on ordinary income, and Euro 2,300 million
will stem from capital gains from the sale of non-strategic assets.
Leverage below 140%. Results in line with targets Results posted in
the first quarter were in line with meeting these goals: EBITDA
climbed 15.3% on a like-for-like basis compared with 1Q06. A
like-for-like net income increase of 11.4% Financial leverage of
124.3%. Shareholder remuneration As for dividends, the Company's
Board of Directors will propose at the General Shareholders Meeting
the payment of a dividend of Euro 1.64 per share against 2006
results, for a total of Euro 1,736 million. Of the proposed
dividend, Euro 1.27 per share will come from ordinary activities,
while Euro 0.37 per share will stem from capital gains from sale of
non-strategic assets. If this dividend proposal is approved at the
General Shareholders Meeting, the Company will have distributed to
its shareholders a total of Euro 4,425 million in the first two
years of the 2005-2009 Strategic Plan � including the attendance
bonus of Euro 0.15 per share for the Extraordinary General
Shareholders Meeting initially scheduled for 20 March, 2007 - which
translates into meeting 44.7% of the target established for the
whole period: or 75% of the target for capital gains from sale of
non-strategic assets, and 35% of the target for dividends from
ordinary activities. RESULTS BY BUSINESS LINE BUSINESS IN SPAIN AND
PORTUGAL Net income Spain and Portugal: Euro 437 million Net income
from business in Spain and Portugal was Euro 437 million in the
first quarter of 2007, an increase of 22.8% (like-for-like)
compared to the same period last year and contributing 69% to the
Company�s total bottom line. EBITDA rose 24.5% to Euro 1,027
million and EBIT by 21.9% to Euro 684 million (both on a
like-for-like basis). Highlights In the first quarter of the year
the Spanish electricity market witnessed a 41.9% fall in wholesale
market prices compared to the first quarter of 2006, caused by a
demand slowdown, a fall of CO2 prices from Euro 21.88/tn to Euro
1.26/tn, and growth of 55.8% and 13% respectively in hydro
generation and renewables/CHP, particularly wind generation.
However, this decline in prices had a limited impact on ENDESA�s
margins thanks to the Company�s focus on supplying the deregulated
market, which acts as natural protection against the risk
associated with generation activities and the fall in variable
costs, mostly CO2 costs, as we explain above. ENDESA sold 51% of
its output to end customers on the deregulated market in the first
quarter of the year, a segment where sales prices increased by
20.7%. In contrast, the rest of the sector sold only 16% of its
output on the deregulated market. This demonstrates that the
Company�s supply strategy gives a comparatively greater coverage
against fluctuations in wholesale market prices. We would also note
that the impact of Royal Decree 3/2006 on results was lower than in
the same period last year. This year, bilateral contracts do not
include the output required to cover supply demands, which in 1Q06
had a negative impact of Euro 43 million. With regard to the
deduction of remuneration according to the value of greenhouse gas
emissions, ENDESA is applying the same criteria in 2007 as it did
in 2006. The fall in CO2 prices means a deduction of only Euro 8
million, compared to Euro 121 million in the first quarter of 2006.
Additionally, results reported for the gas business have shown a
significant improvement in 1Q07, contributing Euro 64 million to
gross margin this quarter vs. Euro 38 million in the same period
last year. ENDESA reported a liberalized gas market share of 13.1%.
Lastly, revenues from distribution business increased by Euro 85
million in the first quarter of the year. Recent regulatory changes
were largely responsible for this performance (Euro 53 million),
and the updated revenues for the period. The increase in
distribution revenues, coupled with sharp reduction in costs, have
driven a 55.7% year-on-year or Euro 131 million increase in EBITDA
in 1Q07. Key operating highlights Still Spain�s leading electric
utility ENDESA has maintained its leading position in the Spanish
electricity market in the first quarter this year. The Company
boasts a 34.6% market share in ordinary regime electricity
generation, a 41.7% share in distribution. 55.6% in sales to
deregulated customers and 42.8% in total sales to final customers.
Competitive advantages in generation relative to peers In Spain,
ENDESA produced a total of 22,972 GWh in 1Q07, compared to total
demand of 28.419 GWh. This means it met 80.8% of its demand from
its own output. Nuclear and hydro powered energy represented 45.9%
of the Company�s mainland generation mix, compared to 43.4% for the
rest of the sector. Furthermore, the load factor at its thermal
facilities was also higher than at its competitors: 65.8% vs.
49.5%, respectively. The load factor at the Company�s coal plants
was a noteworthy 73.3%. Increase in customers The total demand
supplied by ENDESA, measured through sales, was 28,419 GWh in 1Q07,
an increase of 4.8% vs. the first quarter of 2006. The number of
customers supplied by the Company in the distribution business grew
by 250,708 in the last twelve months, reaching 11,278,929 at 31
March 2007. Customers on the deregulated market numbered 1,115,072
at the close of the first quarter, i.e. up 7.4% on the same period
last year. Further improvements in quality of supply The Quality
Plan implemented by ENDESA over the last few years has led to a
sharp improvement in service supply quality. This was once again
evident during 1Q07. Particularly noteworthy if we consider that
this has been achieved in a scenario that featured sharp increases
on demand peaks. ENDESA�s system average interruption duration
index (SAIDI or TIEPI) for 1Q07 was 22 minutes, 34% better than in
1Q06. The 12 month period from 1 April 2006 to 30 March 2007
reflected an improvement of 37% vs. the prior 12 month period. In
terms of customer services, ENDESA's retention rate for customers
switching to the deregulated market is 109.4%, which implies that
the net balance between customers captured and customers lost is
positive. This rate is higher than its peers and reflects strong
loyalty to the Company. Increase in like-for-like sales
Like-for-like sales from electricity business in Spain and Portugal
grew 1.6% in 1Q07 to Euro 2,405 million, compared to 1Q06. The
tariff deficit Despite the 4.3% increase in the electricity tariff
in 2007, regulated revenues were not sufficient to fully cover
system costs. This led to an estimated deficit in revenues from
regulated activities in the sector of Euro 280 million, of which
Euro 124 million corresponds to ENDESA. Article 2 of Royal Decree
3/2006 states that regulated revenues should decline with the
inclusion of CO2 rights by applying the matched selling price in
the wholesale market. This decline amounts to Euro 8 million, so
the net tariff shortfall that must be financed stands at Euro 116
million. In accordance with Royal Decree 1634/2006, this deficit
will be recovered in 2007 by transferring collection rights to
third parties via auction. Additionally, the settlement amount
corresponding to energy sales made between operators belonging to
the same business group as part of a bilateral contract in 2006 has
yet to be determined, along with the discount corresponding to the
incorporation of CO2 emission rights received free of charge in the
setting of prices for the wholesale market, pursuant to Royal
Decree 3/2006. As the government has issued no statement to this
respect, in the recoverable amount deriving from the tariff deficit
in 2006 booked in the Company's accounts for 1Q07 the same
estimates put forward in ENDESA's consolidated financial statements
for 2006 are maintained. As stated then, any variations between the
estimates put forward and definitive figures shall be booked on the
Company�s P&L for the year in which they become known. The
deficit to be recovered in 2006 has been updated solely with
information made available in the last provisional settlement made
by the CNE. This update has had no impact on net profit. Revenues:
Euro 2,480 million ENDESA reported revenues of Euro 2,480 million
from this activity in Jan-Mar 2007, a drop of 6.6% compared to 1Q06
(like-for-like). Of this amount, sales accounted for Euro 2,405
million, 1.6% higher than in 1Q06 (like-for-like). SPAIN AND
PORTUGAL SALES � � Euro million � � � � 1Q07 � 1Q06 (l-f-l) � Chg
(l-f-l) � % Chg Mainland generation under Ordinary Regime � 990� �
1.151� � (161) � (14.0) Sales to deregulated customers � 544� �
422� � 122� � 28.9� Other sales in the OMEL � 446� � 729� � (283) �
(38.8) Renewable/CHP generation � 69� � 83� � (14) � (16.9)
Regulated revenues from distribution � 498� � 413� � 85� � 20.6�
Non-mainland generation and supply* � 454� � 415� � 39� � 9.4�
Supply to deregulated customers outside Spain � 88� � 76� � 12� �
15.8� Gas supply � 205� � 140� � 65� � 46.4� Regulated revenues
from gas distribution � 21� � 12� � 9� � 75.0� Other sales and
services rendered � 80� � 76� � 4� � 5.3� TOTAL � 2,405� � 2,366� �
39� � 1.6� � * For purposes of comparison. 1Q06 figures do not
include the Euro 212 million for compensation for non-mainland
systems in 2001-2005 booked in that quarter. Mainland generation
Demand for electricity in the Spanish mainland system as a whole in
1Q07 grew by 2.2%. Ordinary regime generation fell 13% and
renewable/CHP generation was 3.7% higher. ENDESA�s mainland
electricity output was 19,457 GWh. 2.8% lower than the same period
last year. Of this amount, 18,634 GWh corresponded to power
generated under ordinary regime, a fall of 3.9% compared to 1Q06,
in line with the decline in this type of generation in Spain as a
whole. ENDESA�s renewables/CHP output was 823 GWh. This marked an
increase of 33.8%, which was much higher than the rise seen in this
type of generation in the system as a whole. Average pool price
rose to Euro 44.11/MWh in 1Q07, down 41.9% compared to 1Q06.
Although the fall in mainland output and lower pool prices were
partly offset by higher prices charged to deregulated customers,
there was a 14% decrease in mainland electricity generation sales
under the ordinary regime vs. 1Q06. Additionally, lower prices were
also offset by lower variable costs. Lastly, we would point out
that ENDESA�s coal plants continued to play an important role in
meeting Spanish electricity demand in 1Q07. The utilization rate at
these plants was 73.3% in response to grid requirements, proving
that. in spite of the CCGT and wind farm capacity additions, coal
plants are still indispensable to meet the country�s electricity
requirements. Specifically, ENDESA's coal-fired plants covered
12.2% of mainland demand in the first quarter of the year. ENDESA
renewable/CHP generation Renewable and CHP generation companies
fully consolidated by ENDESA produced 823 GWh of power in 1Q07.
This indicates an increase of 33.8% compared to the same period in
2006. ENDESA also has holdings in other companies which
additionally generated 233 GWh during the same period. Revenues
from sales of renewable/CHP energy generated by consolidated
companies totalled Euro 69 million, 16.9% less than in the first
quarter of 2006. This decline is due to the cessation of renewable
energy supply activities carried out by ECyR during 1Q06 which
entailed higher electricity purchases and sales. Discounting this
factor, sales figures would remain stable as the negative impact of
the lower sales price is offset the increase in generation. Despite
this fall in revenues, gross margin on ENDESA's renewables/CHP
generation business grew 4.8% to Euro 65 million. Supply to
deregulated customers ENDESA had 1,115,072 customers on the
deregulated market at the end of 1Q07: 1,044,900 in the Spanish
mainland market, 66,300 in non-mainland markets and 3,872 in
deregulated markets other than Spain. ENDESA's sales to these
customers as a whole rose to 9,634 GWh in the first quarter of
2007, 0.3% more than in the same period last year. Of this amount,
8,452 GWh was sold to the deregulated Spanish market, i.e. largely
in line with the figure of 8,476 GWh sold in the first quarter of
2006, and 1,182 GWh to European deregulated markets, an increase of
4.6%. Sales to deregulated customers in Spain (excluding tolls paid
to Endesa Distribuci�n), totalled Euro 574 million, a 27% increase
on 1Q06. Of this amount, Euro 544 million corresponded to mainland
deregulated market and Euro 30 million to non-mainland market.
Revenues from sales to deregulated European markets other than
Spain were Euro 88 million, up 15.8% compared to 1Q06. Worth
highlighting is the 20.7% year-on-year increase in the average
selling price to final customers deriving from the Company�s more
stringent and selective commercial policy. Distribution ENDESA
distributed 29,682 GWh of electricity in the Spanish market in
1Q07, 1% more than in the first three months of last year. Revenues
from regulated distribution activities were Euro 498 million, a
20.6% increase on the figure seen in 1Q06, due mainly higher
remuneration for this activity set by the Royal Decree governing
the electricity tariff for 2007. ENDESA supplied 18,785 GWh to
customers on the regulated Spanish market in the period, 7.3% more
than in the same period last year. Non-mainland generation ENDESA�s
output in non-mainland systems was 3,515 GWh in the first quarter
of 2007, 1.7% more than in the same period of 2006. Like-for-like
sales were 10.1% higher at Euro 424 million. Gas distribution and
supply ENDESA sold a total of 9,013 GWh of natural gas in 1Q07,
26.2% more than in the same period last year. Of this amount, 8,759
GWh were sold through fully consolidated companies, representing a
30% increase vs. 1Q06. Also of this amount, 7,645 GWh were sold to
customers on the deregulated market, an increase of 35.9%, and
1,114 GWh to customers on the regulated market in line with the
figure seen in 1Q06. The 9,013 GWh sold in both the regulated and
deregulated markets, together with the 4,064 GWh consumed in
ENDESA�s own generation plants, amount to a total of 13,077 GWh,
implying a market share of 12.1%. In economic terms, the Company
obtained revenues of Euro 205 million from sales of gas on the
deregulated market, an increase of 46.4% vs. 1Q06. This increase
triggered growth of 192.9% on the gross margin from gas supply,
putting this figure at Euro 41 million. Revenues from regulated gas
distribution totalled Euro 21 million, Euro 9 million more than the
same period last year. Other operating revenues Other operating
revenues in 1Q07 came to Euro 75 million, Euro 214 million less
than in 1Q06. This item includes Euro 11 million corresponding to
the 1Q07 portion of CO2 emission rights allocated to ENDESA within
the scope of the Spanish National Allocation Plan for emissions
(NAP). This figure is lower than the Euro 228 million recorded
under revenues in 1Q06, due mainly to the strong fall in the market
price of these rights. However, this drop in revenues was offset by
the lower expense recorded for use of these emission rights.
Operating expenses The breakdown of operating expenses in Spanish
and Portuguese business in 1Q07 is provided below: OPERATING
EXPENSE IN SPAIN AND PORTUGAL � � Euro million � � � � 1Q07 � 1Q06
� Change � % Chg Purchases and services � 965� � 1,340� � (375) �
(28.0) Power purchases � 253� � 301� � (48) � (15.9) Fuel
consumption � 492� � 562� � (70) � (12.5) Power transmission
expenses � 138� � 95� � 43� � 45.3� Other supplies and services �
82� � 382� � (300) � (78.5) Personnel expenses � 276� � 250� � 26�
� 10.4� Other operating expenses � 250� � 271� � (21) � (7.7)
Depreciation and amortisation � 343� � 264� � 79� � 29.9� TOTAL �
1,834� � 2,125� � (291) � (13.7) Power purchases Power purchases
during the period stood at Euro 253 million, a drop of 15.9% vs.
1Q06. This fall reflects the net impact of a decline in operations
costs in wholesale generation market as a result of lower average
pool price, partly offset by higher gas purchases for supply to the
deregulated market. These purchases increased despite the lower
price of gas as a result of the 35.9% rise in sales to these
customers. Fuel consumption Fuel consumption reached Euro 492
million in 1Q07, down 12.5% vs. 1Q06. This decrease was due to the
fall in raw materials costs in the international markets, and. to a
lesser extent lower thermal output during the period. Other
supplies and services Expenses under this line item totalled Euro
82 million in 1Q07, Euro 300 million lower than in 1Q06. Of this
amount, Euro 253 million corresponds to the lower value assigned to
the freely allocated emission rights in 2007 vs. 2006, as described
in section �Other operating revenues�, the lower cost rights
acquired from third parties and the 1.9 million ton reduction in
CO2 emissions made. Personnel and other fixed operating expenses At
31 March, 2007, ENDESA�s workforce in Spain and Portugal stood at
12,706 employees, 5 fewer than at 31 March, 2006. Fixed costs stood
at Euro 526 million in 1Q07 up 1% vs. the same period last year.
Net financial expenses: 33.9% lower (like-for-like) Financial
expenses in 1Q07 stood at Euro 71 million. 35.5% lower than the
figure reported in 1Q06 (like-for-like). Of this amount, Euro 74
million corresponded to net interest expenses, 33.9% less than in
the same period last year (like-for-like), and Euro 3 million to
exchange-rate gains. When assessing financial results, the Euro
2,687 million financial assets corresponding to the tariff deficit
and non-mainland compensation, both of which bear financial
interest, must be considered. Net financial expenses in 1Q07
include revenue of Euro 50 million corresponding to a higher
interest rate applied to calculate the value, at 31 March 2007, of
obligations related to workforce reductions programs existing at
that date compared to the rate used to make this calculation at
year end 2006. The difference is due to higher market interest
rates. Net financial debt for the Spain and Portugal business at 31
March, 2007 stood at Euro 13,252 million vs. Euro 12,548 million at
year-end 2006. Cash flow from operating activities: Euro 667
million Cash flow from operating activities from the Spanish and
Portuguese electricity business totalled Euro 667 million in 1Q07,
an increase of 29.3% on the same period last year on a
like-for-like basis. Investments: Euro 417 million Investments in
Spain and Portugal totalled Euro 417 million in 1Q07, 5.4% lower
than in 1Q06, 87.8% of this figure corresponded to tangible
investment; i.e. capex for the development or improvement of
electricity generation and distribution facilities. TOTAL
INVESTMENT IN SPAIN AND PORTUGAL � � Euro million � � � � 1Q07 �
1Q06 � % Chg Capex � 366� � 401� � (8.7) Intangible � 13� � 2� �
550.0� Financial � 38� � 38� � -� Total investments � 417� � 441� �
(5.4) � CAPEX IN SPAIN AND PORTUGAL � � Euro million � � � � 1Q07
1Q06 � % Chg Generation � 134� 127� � 5.5� Ordinary regime � 100�
110� � (9.1) Renewables/CHP � 34� 17� � 100.0� Distribution � 229�
263� � (12.9) Other � 3� 11� � (72.7) Total � 366� 401� � (8.7) The
breakdown of capex reflects the substantial effort made by the
Company to improve service quality in Spain, with investment in
distribution facilities accounting for 62.6% of the total. We also
highlight the significant increase in capital expenditure to expand
ENDESA�s generation capacity, most notably on construction of the
As Pontes (800 MW) combined cycle facilities and capacity increases
in special regime. BUSINESS IN EUROPE Net income: Euro 100 million
Net income from electricity business in Europe totalled Euro 100
million in the first quarter of 2007, a decrease of 15.3% from the
same period in the previous year. Stripping out the effect from the
cancellation of Delibera 254 made during 1Q06, total net income
would have only decreased by 3.8%. Net income reduction was mainly
due to the output fall in Italy (lower electricity demand as a
result of climatic conditions and larger imports from France taking
advantage of the price gap) and in France (lower electricity demand
and lower utilization rate at thermal plants due to higher rainfall
levels). Highlights ENDESA enters the Greek market On 28 March 2007
Endesa Europa signed a strategic alliance with Greek metallurgy and
engineering company Mytilineos Holdings S.A. to operate in the
Greek market with an option to expand into other markets in
southeast Europe. The agreement will create a joint venture in
which ENDESA will hold a stake of 50.01%. Mytilineos will
contribute all its energy assets (thermal and renewable) as well as
its current licenses. These energy assets include a 511 MW CHP
plant to come on line next June, a CCGT that will be on stream on
2009 and renewable projects totalling 604 MW, of which 54 MW are
currently in operation. The contribution of these assets is
expected to get underway immediately and should be finalised over
the next twelve months. Endesa will also supply Euro 485 million
and, depending on the success of wind projects currently waiting
for authorization, an additional fee up to Euro 115 million. The
new company, which will have the largest order book of construction
and development projects in Greece and a balanced generation mix of
both thermal and renewable capacity, will become the largest
independent energy operator in the country. New installations in
Italy and France At ENDESA Europa, construction on the two 400MW
groups for the Scandale CCGT plant (Calabria) proceeded according
to schedule during 1Q07. In the renewable energies area, Endesa
Europa successfully completed its agreement with Gamesa to acquire
wind farms in Italy, allowing it to add seven plants of this type
to its generation assets in this country, with total capacity of
240 MW, in a period just under three years. The two last companies
to be included in this agreement, acquired in February this year,
own the construction and operation rights for the Piano di Corda
and Serra Pelata wind farms, with total installed capacity of 122
MW. These farms, in addition to the Florinas, Trapani and Vizzini
installations, will give Endesa Europa a 15% share of installed
wind capacity in Italy, will ensure up to 77% of its "green
certificates" in the Italian market and will give it one of the
biggest wind generation operations in the country with installed
capacity close to 400 MW in operation in 2009. The activity of the
French generation company, Snet, since last year operating under
the commercial name, Endesa France, during the first quarter of
2007 form part of the group�s business plan which envisages the
development of new capacity to a total of 2,000 MW of new combined
cycle capacity and 200 MW in renewable plant. As part of this plan,
the group's first wind farm (Lehaucourt 10 MW) came on stream
during the first quarter of the year, and construction of the Les
Vents de Cernon has started. This will have installed capacity of
17.5 MW and is expected to start operating this year. Dividend
payments at Endesa Italia and Snet In 1Q07 Endesa Italia paid
shareholders Euro 216 million, of which Euro 173 million
corresponded to Endesa Europa. Snet also paid a dividend of Euro 33
million to its shareholders, of which Euro 21 million corresponded
Endesa Europa. Lower output and sales due to weather conditions
ENDESA�s total generation in Europe in the first quarter of 2007
amounted to 8,612 GWh. a decrease of 27.9% on the same period in
2006. Electricity sales were down 13.7% to 13,154 GWh. These losses
were due mainly to weather conditions in France and Italy, where
temperatures were milder than in the first quarter of 2006, leading
to a moderation in demand evolution. Also, the price differentials
between France (where they have fallen sharply) and Italy has led
the latter to replace its own production with imports. BREAKDOWN OF
ENDESA�S OUTPUT AND SALES IN EUROPE � � Output (GWh) � � � Sales
(GWh) � � � � 1Q07 � 1Q06 � % Chg � 1Q07 � 1Q06 � % Chg Italy �
6,354� � 7,619� � (16.6) � 8,501� � 9,206� � (7.7) France � 1,691�
� 3,593� � (52.9) � 4,086� � 5,301� � (22.9) Poland* � 567� � 731�
� (22.4) � 567� � 731� � (22.4) TOTAL � 8,612� � 11,943� � (27.9) �
13,154� � 15,238� � (13.7) � (*) ENDESA is present in the
generation business in Poland through the Bialystock CHP. which is
controlled by Snet. EBITDA: Euro 310 million ENDESA�s business
activity in Europe reported EBITDA of Euro 310 million in 1Q07, a
drop of 3.7% vs. 1Q06 and EBIT of Euro 224 million, down 12.8%.
These decreases were due to the aforementioned drop in output and
lower prices on the wholesale market both in Italy and France.
EBITDA & EBIT IN EUROPE � � � � EBITDA (Euro million) � EBIT
(Euro million) � � 1Q07 � 1Q06 � % Chg � 1Q07 � 1Q06 � % Chg Italy
(*) � 247� � 260� � (5.0) � 186� � 222� � (16.2) Snet � 60� � 56� �
7.1� � 34� � 29� � 17.2� Trading � 15� � 15� � -� � 15� � 15� � -�
Holding & others � (12) � (9) � (33.3) � (11) � (9) � (22.2)
Total � 310� � 322� � (3.7) � 224� � 257� � (12.8) � (*) Includes
Endesa Italia. Teverola and Ferrara in 1Q07 (the last two were
acquired in September 2006). Italy maintains good performance
Electricity demand in the Italian power system as a whole fell by
nearly 2% in 1Q07 mainly due to unfavourable weather conditions.
This, coupled with increase in imports in the north of the country
due to the price differential between Italy and France, meant that
utilization at ENDESA�s plants in Italy was lower, leading to a
16.6% fall in power generation (which stood at 6,354 GWh).
Furthermore, these two factors triggered a drop in electricity
prices on the wholesale market and a 12.1% decline in group sales
in Italy. The fall in revenues that this caused (-13.5%) was not
fully offset by the 23% reduction in fuel costs and the lower cost
of CO2 emissions prompted by the sharp fall in the price of
emission rights and therefore the impact on both EBITDA (-5%) and
EBIT (-16.2%) was negative. ENDESA ITALIA KEY DATA � � Euro million
� � � 1Q07 � 1Q06 � Change � % Chg Revenues � 700� � 809� � (109) �
(13.5) Gross margin � 288� � 299� � (11) � (3.7) EBITDA � 247� �
260� � (13) � (5.0) EBIT � 186� � 222� � (36) � (16.2) We note that
the EBITDA reported by ENDESA's businesses in Italy in 1Q06
included revenues of Euro 26 million from the cancellation of
Delibera 254. Stripping out this effect, which did not relate to
electricity sales in 2006, EBITDA would have increased by 5.6%.
Growing results at Snet Snet�s results marked a positive trend in
1Q07, despite a drop in electricity generation triggered by
unfavourable weather conditions as in Italy. This positive
performance was underpinned by a drop in fixed and variable costs.
EBITDA in 1Q07 rose 7.1% to Euro 60 million and EBIT by 17.2% to
Euro 34 million vs. 1Q06. SNET KEY DATA � � Euro million � � � 1Q07
� 1Q06 � Change � % Chg Revenues � 273� � 333� � (60) � (18.0)
Gross profit � 95� � 94� � 1� � 1.1� EBITDA � 60� � 56� � 4� � 7.1�
EBIT � 34� � 29� � 5� � 17.2� The French generation company
reported revenues of Euro 273 million in 1Q07, a drop of 18% vs.
1Q06. This decrease was due to a 47.8% drop in electricity
generation and lower wholesale market prices. Variable costs fell
Euro 61 million, i.e. 25.5% due mainly to a decrease in production,
while fixed costs declined 7.9%. Lower fixed and variable costs
allowed to largely offset the fall in revenues, leading to a 7.1%
increase in EBITDA and a 17.2% rise in EBIT, to Euro 60 million and
Euro 34 million respectively. European business debt: down Euro 65
million Net debt at ENDESA�s electricity business in Europe stood
at Euro 1.609 million at the close of 1Q07, a reduction of Euro 65
million, or 3.9%, over the debt balance at the end of 1Q06. Net
financial results amounted to an expense of Euro 19 million in
1Q07, Euro 8 million higher than in 1Q06. Note that in 2H06, debt
increased in the European business line due to investments carried
out during the period, leading to a higher financial expense in
1Q07 vs. 1Q06. Cash flow from operating activities: Euro 227
million ENDESA�s business in Europe generated Euro 227 million of
cash flow in 1Q07, an increase of 9.1% with respect to 1Q06.
Investments: Euro 63 million Investment in this business area
totalled Euro 63 million in 1Q07. Of this amount, Euro 34 million
was capex (Endesa Italy: Euro 23 million, SNET: Euro 11 million).
Financial investments during the period totalled Euro 27 million
and include the acquisition of the Serra Pelata (Euro 14 million)
and Piano di Corda (Euro 8 million) wind farms. BUSINESS IN LATIN
AMERICA Net income of Euro 96 million In Latin America net income
rose 2.1% on a like-for-like basis from the first quarter of 2006
to Euro 96 million euros. Highlights Growth in volume sales in
generation and distribution An improved economic environment in
countries where ENDESA has subsidiaries led to sharp increases in
electricity demand in 1Q07 (all above 3.6%). Particularly
noteworthy were the increases in demand in Peru (9.7%), Chile
(7.3%) and Colombia (5.2%). Higher demand underpinned total
electricity sales by distribution subsidiaries of 15,268 GWh. up
6.3% vs. 1Q06, with particularly significant increases in Argentina
(+8.8%) and Colombia (+8.1%). Production rose 7.2% vs. 1Q06 to
15,711 GWh. The largest increases were in Peru (+28.3%) following
the coming on stream of the Ventanilla CCGT, and in Chile (+18.8%)
due to higher hydro output. OUTPUT AND SALES IN THE LATIN AMERICAN
BUSINESS � � Output (GWh) � Sales (GWh) � � 1Q07 � % Chg vs. 1Q06 �
1Q07 � % Chg vs. 1Q06 Chile � 5,192� � 18.8� � 3,157� � 5.1�
Argentina � 4,674� � 2.1� � 3,985� � 8.8� Peru � 2,118� � 28.3� �
1,292� � 6.9� Colombia � 2,745� � (7.8) � 2,750� � 8.1� Brazil �
982� � (9.1) � 4,084� � 3.7� TOTAL � 15,711� � 7.2� � 15,268� �
6.3� Improvement in generation and distribution margins Growth in
demand, tighter reserve margins and favourable generation mix at
ENDESA�s Latin American subsidiaries caused the unit margin of
generation companies to increase by 14.9% in 1Q07 vs. 1Q06 to USD
29.7 per MWh produced. Generation margins, measured in dollars,
increased sharply, above all in Chile (+20.4%) thanks to the
increase in the wholesale price and a greater contribution by hydro
in the generation mix; and in Argentina (+17.7%), due to favourable
weather conditions and higher prices thanks to the pass-through of
higher fuel costs to the wholesale electricity market (MEM). In
Peru, production mix, with a larger thermal component, and lower
prices to the final customer caused a 14.7% reduction in the
average margin vs. 1Q06. In distribution, key operating figures
were considerably boosted by higher electricity sales and operating
efficiency improvements at the companies. The unit margin stood at
USD 39.2/MWh distributed, an increase of 12.6% vs. 1Q06. Reduction
in distribution losses Energy distribution losses were 11.1% in
1Q07, an improvement of 0.2 percentage points vs. the same period
in 2006. Worth highlighting is the 0.5 percentage point improvement
in Brazil thanks to innovated solutions against fraud. New capacity
development In 1Q07 ENDESA Chile continued with construction of the
San Isidro II (Chile) CCGT plant, which will have an installed
capacity of 377 MW. In 2Q07, and within the established time frame,
the open cycle of this plant came on stream with an output of 246
MW. This is 26 MW greater than the projected output thanks to
technical improvements achieved whilst the project was under
development. The company also continued work on construction of the
32 MW Palmucho hydro plant in Chile. Work also continued on the
Aysen project, which starts in 2008. This project entails
construction of four hydro plants with approximate total installed
capacity of 2,400 MW, the last of which is currently estimated to
come on stream towards the end of 2018, ENDESA Chile holds a 51%
stake in this project, with Colbun controlling the other 49%. Work
also continued on the construction of the liquefied natural gas
plant (LNG) located in Quintero (Chile), in which ENDESA Chile will
hold a 20% stake. Its partners in the project are British Gas,
Metrogas and ENAP. Meanwhile, ENDESA Eco continued work on projects
started in Chile in 1Q06: the Canela wind farm, the first stage of
which will have an output of 9 MW (of a total projected output of
18 MW), and the 9 MW Ojos de Agua mini hydro station. Regulatory
update In Argentina, Edesur began applying the first distribution
tariff increase since the economic crisis of 2001 following the
publication of the corresponding resolution by the electricity
sector regulator (ENRE). The application of this increase, which is
retroactive to November 2005, will enable Edesur to regain
sufficient levels of profitability and to make the necessary
investments to meet increasing demand in its market while
simultaneously enhancing service quality. In Brazil, the tariff
readjustment approved by the electricity regulator ANEEL for Ampla
came into effect on 15 March. This readjustment will be in force
for one year and increases the VAD by 9.6%. In 2Q07 the node price
report for the April-October half year was published in Chile. The
price increased by 6% vs. the previous half year to USD73.3/MWh.
EBITDA: +12.8% EBITDA in the Latin American business totalled Euro
663 million in 1Q07, a 12.8% increase on 1Q06. EBIT rose 16.1% to
Euro 535 million. EBITDA & EBIT IN LATIN AMERICA Euro million �
EBITDA � EBIT � � 1Q07 � 1Q06 � % Chg � 1Q07 � 1Q06 � % Chg
Generation and transmission � 335� � 322� � 4.0� � 262� � 251� �
4.4� Distribution � 349� � 277� � 26.0� � 295� � 222� � 32.9� Other
� (21) � (11) � NA � (22) � (12) � NA TOTAL � 663� � 588� � 12.8� �
535� � 461� � 16.1� Measured in local currencies, EBITDA rose 21.8%
and EBIT climbed 25.6%, both vs. 1Q06. The table below shows the
breakdown of EBITDA and EBIT of ENDESA�s fully consolidated
subsidiaries by business line and country: BREAKDOWN OF EBITDA AND
EBIT IN LATAM BY BUSINESS LINE AND COUNTRY Generation and
transmission Euro million � EBITDA � EBIT � � 1Q07 � 1Q06 � % Chg �
1Q07 � 1Q06 � % Chg Chile � 169� � 133� � 27.1� � 139� � 104� �
33.7� Colombia � 48� � 63� � (23.8) � 37� � 51� � (27.5) Brazil -
Generation � 38� � 34� � 11.8� � 33� � 29� � 13.8� Peru � 42� � 45�
� (6.7) � 30� � 34� � (11.8) Argentina - Generation � 38� � 34� �
11.8� � 27� � 25� � 8.0� TOTAL GENERATION � 335� � 309� � 8.4� �
266� � 243� � 9.5� Interconnection Brazil-Argentina � -� � 13� � NA
� (4) � 8� � NA TOTAL GENERATION AND TRANSMISSION � 335� � 322� �
4.0� � 262� � 251� � 4.4� � Distribution Euro million � EBITDA �
EBIT � � 1Q07 � 1Q06 � % Chg � 1Q07 � 1Q06 � % Chg Chile � 51� �
50� � 2.0� � 45� � 43� � 4.7� Colombia � 58� � 63� � (7.9) � 41� �
48� � (14.6) Brazil � 154� � 117� � 31.6� � 137� � 99� � 38.4� Peru
� 25� � 22� � 13.6� � 17� � 14� � 21.4� Argentina � 61� � 25� �
144.0� � 55� � 18� � 205.6� TOTAL DISTRIBUTION � 349� � 277� �
26.0� � 295� � 222� � 32.9� Generation and transmission Chile
Energy generated in 1Q07 rose 18.8% vs. the same period in 2006 to
5,192 GWh. This increase was due to higher rainfall that
much-improved the generation mix. Hydro production increased to
78.8% of total generation, protecting the division�s results
against the rise in fuel prices (+120.8%). The increase in
generation, primarily hydro, and higher wholesale prices generated
a 27.1% increase in EBITDA and a 33.7% increase in EBIT to Euro 169
million and Euro 139 million respectively vs. 1Q06. Colombia Both,
generation EBITDA and EBIT in Colombia, were affected by the
one-off impact of the tax on companies� assets at 31 December 2006,
which totalled Euro 18 million. Stripping out this one-off impact,
EBITDA and EBIT would have grown by 4.8% and 7.8% respectively.
This increase was due firstly to the higher capacity payments
reported by Emgesa following the application of the new Reliability
Charge and secondly to improved margin from the sale of electricity
acquired on the market to partially offset the reduction in
generation. Both effects offset the 7.8% decline in generation,
caused primarily by the impact of the meteorological phenomenon �El
Ni�o� on the output of the Betania power station. Brazil -
Generation ENDESA�s subsidiaries in Brazil generated total output
of 982 GWh in 1Q07, 9.1% down on the same period in 2006, mostly as
a result of the gas supply problems which affected its Fortaleza
plant. Lower thermal generation was offset with larger purchases on
the spot market at lower prices to meet contractual electricity
supply obligations and with the business�s improved generation mix
resulting from the increase in its hydro output. Consequently,
EBITDA rose 11.8% to Euro 38 million while EBIT increased by 13.8%
to Euro 33 million. Peru ENDESA�s subsidiaries in Peru generated
total output in 1Q07 of 2,118 GWh. 28.3% more than in 1Q06. This
growth was due to the Company�s higher thermal and hydro output
resulting from the incorporation of the gas units of the 166 MW
Ventanilla CCGT and the increased availability of the Piura power
station, which was off stream for two and a half months last year.
However, the increase in output failed to fully offset the fall in
sale prices; as a result revenues fell 5.3%. This fall, together
with the impact on the costs of increased thermal production,
caused EBITDA to fall 6.7% to Euro 42 million and EBIT by 11.8% to
Euro 30 million. Argentina Gas supply problems continued to push up
fuel costs (by 34.2%), as generators were forced to generate
electricity using fuel-oil. However, increased sales (+19.1%) from
higher prices and, to a lesser extent, increased production had a
positive impact on margins. EBITDA was Euro 38 million, up 11.8% on
1Q06, while EBIT stood at Euro 27 million, an 8% increase.
Interconnection between Argentina and Brazil This interconnection�s
EBITDA was the equivalent of zero in 1Q07, i.e. Euro 13 million
less than in 1Q06, while EBIT was a negative Euro 4 million, Euro
12 million less than in 1Q06. This poor performance was due to the
fact that the line is not being used because of the difficulties
exporting electricity from Argentina to Brazil as a consequence of
the gas supply problems. Cien, the line operator, is looking at the
possibility of changing its business model for the operation of the
interconnection so that it becomes reasonably profitable again.
Distribution Chile Revenues rose 5.5% thanks to higher volume sales
(5.1%) and the better unit price deriving from changes in the
tariff indexation. This top-line growth underpinned a 2% rise in
EBITDA to Euro 51 million and a 4.7% increase in EBIT to Euro 45
million. Colombia Both EBITDA and EBIT at the Colombian
distribution business were affected by the one-off impact of the
above-mentioned tax on companies� assets at 31 December 2006, which
totalled Euro 11 million. Stripping out this impact, EBITDA and
EBIT rose 9.5% and 8.3% respectively, primarily as a result of
revenues from accessory activities and higher physical sales.
Brazil Sales in the Brazilian distribution business stood at Euro
439 million in 1Q07, a 4.3% increase over 1Q06. This increase
primarily reflects the higher volumes of energy sold (+3.7%) and
the application of lower surcharges on the tariff in relation to
the same period in 2006. The increase in sales, coupled with a
significant decline in energy losses, led to respective increases
in EBITDA and EBIT of 31.6% and 38.4% to Euro 154 million and Euro
137 million vs. 1Q06. Peru EBITDA from distribution in Peru came to
Euro 25 million in 1Q07, a 13.6% increase on 1Q06, due to the 6.9%
increase in energy sold. EBIT rose +21.4% to Euro 17 million.
Argentina Sales at the Argentine distribution business increased by
46% as a result of booking Euro 40 million in 1Q07 from the tariff
increase approved retroactively to November 2005. This was applied
following the publication of the corresponding resolution by the
electricity sector regulator (ENRE). As a result, EBITDA increased
by 144% to Euro 61 million and EBIT by 205.6% to Euro 55 million.
Financial results: Euro 139 million Financial results for the
business in Latin America reflected a loss of Euro 139 million in
the first quarter of 2007, Euro 15 million more than in 1Q06. Net
exchange-rate gains were Euro 11 million lower, down from Euro 16
million in 1Q06 to Euro 5 million in the first quarter of this
year. Net financial expenses totalled Euro 144 million in 1Q07,
Euro 4 million or 2.9% higher than in 1Q06. Net debt at Latin
American business stood at Euro 5,695 million at 31 March 2007 an
increase of Euro 77 million since the start of the year. Cash flow
from operating activities: +15.2% Cash flow generated by the
group�s business in Latin America totalled Euro 418 million in the
first quarter of 2007, an increase of 15.2% with respect to the
same period in 2006. Cash returns: USD 118 million Cash returns
from ENDESA�s Latin American business to the parent company in 1Q07
totalled Euro 118 million. The amount achieved in 1Q07, added to
the USD 561 million of returns in 2005 and 2006. means the company
has achieved 42.4% of its current strategic target of USD1.600
million. Investments: Euro 281 million Investment in Latin America
in 1Q07 totalled Euro 281 million, of which Euro 150 million
corresponded to capex. The financial investments in the period
include acquisitions by Endesa Chile in February and March of
third-party stakes in Costanera (5.5%), Hidroinvest (25%) and
Hidroel�ctrica El Choc�n (2.48%). By business line, tangible
investments (capex) break down as follows: CAPITAL EXPENDITURE IN
LATIN AMERICA � � Euro million � � � � 1Q07 � 1Q06 � % Chg
Generation � 55� � 80� � (31.3) Distribution and Transmission � 79�
� 104� � (24.0) Other � 16� � 9� � 77.8� TOTAL � 150� � 193� �
(22.3) STATISTICAL APPENDIX KEY FIGURES Electricity Generation
Output (GWh) � 1Q07 � 1Q06 � % Chg Business in Spain and Portugal �
22,972� � 23,464� � (2.1) Business in Europe � 8,612� � 11,943� �
(27.9) Business in Latin America � 15,711� � 14,656� � 7.2� TOTAL �
47,295� � 50,063� � (5.5) Electricity Generation Output in Spain
& Portugal (GWh) � 1Q07 � 1Q06 � % Chg Mainland � 19,457� �
20,008� � (2.8) Nuclear � 6,640� � 6,450� � 2.9� Coal � 8,247� �
8,717� � (5.4) Hydro � 1,910� � 1,793� � 6.5� Combined cycle - CCGT
� 1,739� � 2,030� � (14.3) Fuel oil � 98� � 403� � (75.7)
Renewables/CHP � 823� � 615� � 33.8� Non-mainland � 3,515� � 3,456�
� 1.7� TOTAL � 22,972� � 23,464� � (2.1) Electricity Generation
Output in Europe (GWh) � 1Q07 � 1Q06 � % Chg Coal � 3,814� � 5,943�
� (35.8) Hydro � 422� � 839� � (49.7) Combined cycle - CCGT �
3,461� � 3,292� � 5.1� Fuel oil � 871� � 1,860� � (53.2) Wind � 44�
� 9� � 388.9� TOTAL � 8,612� � 11,943� � (27.9) Electricity
Generation Output in Latin America (GWh) � 1Q07 � 1Q06 � % Chg
Chile � 5,192� � 4,369� � 18.8� Argentina � 4,674� � 4,580� � 2.1�
Peru � 2,118� � 1,651� � 28.3� Colombia � 2,745� � 2,976� � (7.8)
Brazil � 982� � 1,080� � (9.1) TOTAL � 15,711� � 14,656� � 7.2�
Electricity sales (GWh) � 1Q07 � 1Q06 � % Chg Business in Spain and
Portugal � 28,419� � 27,108� � 4.8� Regulated market � 18,785� �
17,502� � 7.3� Deregulated market � 9,634� � 9,606� � 0.3� Business
in Europe � 13,154� � 15,238� � (13.7) Italy � 8,501� � 9,206� �
(7.7) France � 4,086� � 5,301� � (22.9) Poland � 567� � 731� �
(22.4) Business in Latin America � 15,268� � 14,363� � 6.3� Chile �
3,157� � 3,005� � 5.1� Argentina � 3,985� � 3,664� � 8.8� Peru �
1,292� � 1,209� � 6.9� Colombia � 2,750� � 2,545� � 8.1� Brazil �
4,084� � 3,940� � 3.7� TOTAL � 56,841� � 56,709� � 0.2� Gas sales
(GWh) � 1Q07 � 1Q06 � % Chg Regulated market � 1,114� � 1,115� � -�
Deregulated market � 7,645� � 5,624� � 35.9� TOTAL � 8,759� �
6,739� � 30.0� Workforce � 31-03-07� � 31-03-06� � % Chg Business
in Spain and Portugal � 12,706� � 12,711� � -� Business in Europe �
2,132� � 2,112� � 0.9� Business in Latin America � 12,050� �
12,316� � (2.2) TOTAL � 26,888� � 27,139� � (0.9) FINANCIAL DATA
Key figures � 1Q07 � 1Q06 � % Chg EPS (Euro) � 0.60� � 0.99� �
(39.8) CFPS (Euro) � 1.24� � 1.23� � 1.0� BVPS (Euro) � 11.17� �
9.67� � 15.5� Net financial debt (Euro million) � 31-03-07� �
31-12-06� � % Chg Business in Spain and Portugal � 13,252� �
12,548� � 5.6� Business in Europe � 1,609� � 1,674� � (3.9) Endesa
Italia � 806� � 748� � 7.8� Other � 803� � 926� � (13.3) Business
in Latin America � 5,695� � 5,618� � 1.4� Enersis � 4,864� � 4,749�
� 2.4� Other � 831� � 869� � (4.4) TOTAL � 20,556� � 19,840� � 3.6�
� � � � � � � Financial leverage (%) � 124.3� � 124.5� � -� Net
debt/Operating cash flow (times) � 2.6� � 2.8� � -� Interest
coverage by operating cash flow (times) � 7.8� � 7.4� � -� Ratings
(04.05.07) � Long term � Short term � Outlook Standard & Poor�s
� A � A-1 � Creditwatch (-) Moody�s � A3 � P-2� � Creditwatch (-)
Main fixed-income issues � Spread over IRS (bp) � � 31-03-07� �
31-12-06� 2.2Y Euro 700M 4.375% Mat. June 2009 � (3) � 6� 5.2 Y GBP
400M 6.125% Mat. June 2012 � 19� � 25� 5.9 Y Euro 700M 5.375% Mat.
Feb 2013 � 19� � 24� Stock market data � 31-03-07� � 31-12-06� � %
Chg Market cap (Euro million) � 42,858� � 37,935� � 13.0� Number of
shares outstanding � 1,058,752,117� � 1,058,752,117� � --� Nominal
share value (Euro) � 1.2� � 1.2� � --� Stock market data � 1Q07 �
1Q06 � % Chg Trading volumes (shares) � � Madrid stock exchange �
1,275,964,794� � 733,242,188� � 74.0� NYSE � 11,206,666� �
7,896,100� � 41.9� Average daily trading volume (shares) � � Madrid
stock exchange � 20,253,409� � 11,456,909� � 76.8� NYSE � 186,778�
� 127,357� � 46.7� Share price � 1Q07 high � 1Q07 low � 31-03-07� �
31-12-06� Madrid stock exchange (Euro) � 40.55� � 35.21� � 40.48� �
35.83� NYSE (USD) � 53.86� � 45.75� � 53.53� � 46.52� Dividends
(Euro cents/share) Payable against 2006 results Interim dividend
(02/01/07) 50.00� Special dividend (*) 114.00� Total DPS 164.00�
Pay-out (%) 58.48� Dividend yield (%) 4.58� � (*) Pending approval
at the General Shareholders' Meeting. IMPORTANT LEGAL DISCLAIMER
This document was made available to shareholders of Endesa, S.A..
In relation with the announced joint offer by ENEL SpA and Acciona,
S.A., Endesa shareholders are urged to read the report of Endesa�s
board of directors when it is filed by the Company with the
Comisi�n Nacional del Mercado de Valores (the "CNMV"), as well as
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. Such documents and other public filings made from time
to time by Endesa with the CNMV or the SEC are available without
charge from the Endesa�s website at www.endesa.es, from the CNMV�s
website at www.cnmv.es and from the SEC�s website at www.sec.gov
and at Endesa�s principal executive offices in Madrid, Spain. This
presentation contains certain �forward-looking� statements
regarding anticipated financial and operating results and
statistics and other future events. These statements are not
guarantees of future performance and they are subject to material
risks, uncertainties, changes and other factors that may be beyond
ENDESA�s control or may be difficult to predict. Forward-looking
statements include, but are not limited to, information regarding:
estimated future earnings; anticipated increases in wind and CCGTs
generation and market share; expected increases in demand for gas
and gas sourcing; management strategy and goals; estimated cost
reductions; tariffs and pricing structure; estimated capital
expenditures and other investments; estimated asset disposals;
estimated increases in capacity and output and changes in capacity
mix; repowering of capacity and macroeconomic conditions. For
example, the EBITDA (gross operating profit as per ENDESA�s
consolidated income statement) target for 2007-2009 included in
this presentation are forward-looking statements and are based on
certain assumptions which may or may not prove correct. The main
assumptions on which these expectations and targets are based are
related to the regulatory setting, exchange rates, divestments,
increases in production and installed capacity in markets where
ENDESA operates, increases in demand in these markets, assigning of
production amongst different technologies, increases in costs
associated with higher activity that do not exceed certain limits,
electricity prices not below certain levels, the cost of CCGT
plants, and the availability and cost of the gas, coal, fuel oil
and emission rights necessary to run our business at the desired
levels. In these statements we avail ourselves of the protection
provided by the Private Securities Litigation Reform Act of 1995 of
the United States of America with respect to forward-looking
statements. The following important factors, in addition to those
discussed elsewhere in this presentation, could cause actual
financial and operating results and statistics to differ materially
from those expressed in our forward-looking statements: Economic
and industry conditions: significant adverse changes in the
conditions of the industry, the general economy or our markets; the
effect of the prevailing regulations or changes in them; tariff
reductions; the impact of interest rate fluctuations; the impact of
exchange rate fluctuations; natural disasters; the impact of more
restrictive environmental regulations and the environmental risks
inherent to our activity; potential liabilities relating to our
nuclear facilities. 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. Delays in or
impossibility of obtaining the pertinent permits and rezoning
orders in relation to real estate assets. Delays in or
impossibility of obtaining regulatory authorisation, including that
related to the environment, for the construction of new facilities,
repowering or improvement of existing facilities; shortage of or
changes in the price of equipment, material or labour; opposition
of political or ethnic groups; adverse changes of a political or
regulatory nature in the countries where we or our companies
operate; adverse weather conditions, natural disasters, accidents
or other unforeseen events, and the impossibility of obtaining
financing at what we consider satisfactory interest rates.
Political/governmental factors: political conditions in Latin
America; changes in Spanish, European and foreign laws, regulations
and taxes. Operating factors: technical problems; changes in
operating conditions and costs; capacity to execute cost-reduction
plans; capacity to maintain a stable supply of coal, fuel and gas
and the impact of the price fluctuations of coal, fuel and gas;
acquisitions or restructuring; capacity to successfully execute a
strategy of internationalisation and diversification. Competitive
factors: the actions of competitors; changes in competition and
pricing environments; the entry of new competitors in our markets.
Further details on the factors that may cause actual results and
other developments to differ significantly from the expectations
implied or explicitly contained in the presentation are given in
the Risk Factors section of Form 20-F filed with the SEC and in the
ENDESA Share Registration Statement filed with the Comisi�n
Nacional del Mercado de Valores (the Spanish securities regulator
or the �CNMV� for its initials in Spanish).No assurance can be
given that the forward-looking statements in this document will be
realised. Except as may be required by applicable law, neither
Endesa nor any of its affiliates intends to update these
forward-looking statements.
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