Endesa S.a. · BME:ELE
Endesa — Investor Day (June 2007)
43 slides from Endesa's investor day presentation, Jun 25, 2007
Slide 1: Endesa Red Growth and Profitability
Endesa Red Growth and Profitability Jose Luis Marin Lopez-Otero Chief Executive Endesa Red Valencia, June 25, 2007
Slide 2: Contents
Contents Endesa Red now Results obtained Regulatory framework Our "route map": Strategic plan A future of growth and profitability 1
Slide 3: Endesa Red is the merger result of several distribution companies
Endesa Red is the merger result of several distribution companies Diverse Diverse corporate Gradual stake takeover in companies cultures diverse distribution companies ending in 1998 when Endesa reaches 100% Enher Intense consolidation process ERZ Fecsa during the period 1998-2001 - - From 12.421 to
Slide 4: Endesa Red is the merger result of several distribution companies
Endesa Red is the merger result of several distribution companies Diverse Diverse corporate Gradual stake takeover in companies cultures diverse distribution companies ending in 1998 when Endesa reaches 100% Enher Intense consolidation process ERZ Fecsa during the period 1998-2001 - From 12.421 to 6
Slide 5: Endesa Red groups electricity and gas transmission and distribution business
Endesa Red groups the electricity and gas transmission and distribution business, client services and other related activities Endesa Red Electricity Gas transmission &transmission & distribution distribution Client services Other related (technical &activities sales) 4
Slide 6: It is the Spanish leader in electricity
It is the Spanish leader in electricity Market 197,875 sq km (39% of Spain) 11.2 million customers (43% of Spain) 20 million users 2,740 municipalities 113 TWh energy demand (43% of Spain), with annual average growth of 4.8% in the last five years Assets 22,176 km of HV lines 111,099 km of MV lines
Slide 7: In gas it is consolidating sustained growth, achieving 15% market share
and in the gas industry it is consolidating a sustained growth, achieving a 15% market share in ten years Customers 55,000 442,637 50,000 411,207 45,000 380,407 Endesa Red: 351,000 40,000 325,110 customers to 301,143 double over 10 35,000 275,876 years 253,367 30,000 25,000 In 2006 net 20,000 income
Slide 8: Complementary activities represent a key element for non-liquid income
Complementary activities represent a key element for the development of non-liquid income Various units of the company are orientated towards the provision of electricity business related services to other clients Electricity infrastructure "Turn-key" proyects and installations Technological Electri
Slide 9: Endesa Red holds million contacts per year with clients
Endesa Red holds 156 million contacts per year during the provision of technical and commercial services to its clients, obtaining constant key feedback for the continuous improvement of the service NEW CLIENTS METERING - BILLING 620,000 new 69 million bills per year contracts per year 250,000 new h
Slide 10: Contents
Contents Endesa Red now Results obtained Regulatory framework Our "route map": Strategic plan A future of growth and profitability 9
Slide 11: Endesa Red measures its results on four dimensions of its Business Vision
Endesa Red measures its results on the basis of the four dimensions of its Business Vision... Sustainability Profitability Quality Safety 10
Slide 12: Four dimensions of Business Vision in a dynamic environment
Endesa Red measures its results on the basis of the four dimensions of its Business Vision... ... and all this in a dynamic environment Patrocinador Oficial de la 32a Ameerica’s Cup 11
Slide 13: Endesa Red achieved splendid financial results in 2006
Endesa Red achieved splendid financial results in 2006... Profitability (euro)M 2005 2006 Variacion Revenues 7,082 7,512 +6% Gross margin 1,806 1,982 +10% EBITDA 889 1,115 +25% EBIT 479 678 +42% Net financial expenses -253 -179 -29% Net income 199 531 +167% ... which confirm a clear 2005 2006 2007e
Slide 14: Achieving a quality of supply superior to the national average
Achieving a quality of supply superior to the national average Quality Unscheduled Distribution SAIDI Distribucion SAIDI (hours per year) (hours per year) 2.90 Canary Islands 0,95 2.71 Spain 2.66 2.70 Endesa Balearic Islands 1,09 2.50 2.42 Aragon 1,17 Navarra 1,19 2.30 2.18 Madrid 1,21 2.04 2.10 Can
Slide 15: Taking strict care our targets in Work Safety are met
Taking strict care our targets in area of Work Safety are met Safety Frequency Index Seriousness Index 16 -38% 0.9 13.93 14 0.8 0.80 0.7 0.72 12 9.57 0.6 10 8.67 0.5 8 0.43 0.4 6 -46% 0.3 4 per # of hours actually worked 0.2 # accidents per 1M hours worked 2 # of days lost through time off work 0.1
Slide 16: .... and meeting social commitments
.... and meeting social commitments Sustainability Efficient equipment using Investment capacity to cover the latest technologies and perfectly increases in demand integrated with its environment Changes in total SAIDI and demand TWh Hours / year 115 5.3 113 4.71 110 4.8 110 4.3 105 3.73 104 3.8 100
Slide 17: .... and meeting social commitments
.... and meeting social commitments Sustainability Investment capacity increases in demand International recognition demand Hours / year 5.3 113 4.8 110 4.3 3.8 o (euro)4.127 bn euros 3.3 2003-2006 2.66 Maximum valuation in electricity industry of 2.8 o Over 1 bn / year Dow Jones Sustainability Worl
Slide 18: Endesa Red is a benchmark at a European level
In key aspects of the distribution business, Endesa Red is a benchmark at a European level Endesa's average cost per client (~(euro)23.9) is substantially below the average of the European companies (~(euro)37.2) Commercial This good performance is mostly explained: phase - Customer Service ((euro)3
Slide 19: Contents
Source: McKinsey report Contents Endesa Red now Results obtained Regulatory framework Our "route map": Strategic plan A future of growth and profitability 18
Slide 20: In 2007 the overall compensation (R0) was updated
In 2007 the overall and companies compensation (R0) was updated and represented an increase in remuneration of (euro)245M per year for Endesa Increase of (euro)578M in 2007 compared with 2006: (euro)500M of additional increase in remuneration with quotas granted by sector (Endesa (euro)210M) (euro)7
Slide 21: Changes in remuneration will take into account the increase in activity
Changes in remuneration will take into account the increase in activity with incentives for quality and losses The former formula considered the increase in average demand with an efficiency factor (FE) of 0.3: IPCn - Xn ( ) Rn = Rn -1 * 1+ *[1+ Dn * FE ] 100 Under the new proposal, the remuneration
Slide 22: Transposition of the EU Directive moves towards unbundling and end of tariff
The transposition of the EU Directive moves towards the unbundling of activities and the end of tariff Unbundling of supply and distribution, giving responsibility of the commercialization of the regulated energy (tariff) to the supplier company Criteria to guarantee the independent management of th
Slide 23: Contents
Contents Endesa Red now Results obtained Regulatory framework Our "route map": Strategic plan A future of growth and profitability 22
Slide 24: Significant EBITDA growth target based on efficient cost management
In this context, Endesa Red has defined a significant EBITDA growth target based on an efficient cost management which is making an improvement of margins possible Zero VAD Growth hypothesis Absolute terms (euro) Unit values ((euro) per MWh) CAGR: +9% CAGR: +14% 2005 2006 2007 2008 2009 2005 2006 20
Slide 25: Significant EBITDA growth target based on efficient cost management
In this context, Endesa Red has defined a significant EBITDA growth target based on an efficient cost management which is making an improvement of margins possible Zero VAD Growth hypothesis Absolute terms ((euro)) Unit values ((euro) per MWh) Achieved CAGR: +9% CAGR: +14% 2005 2006 2007 2008 2009 2
Slide 26: Set of initiatives under the Strategic Plan
In order to achieve this target a set of initiatives under the Strategic Plan are being drawn up Initiatives to Improving regulated remuneration increase revenues Developing variable income Efficiency in the organisation and in human Plan Initiatives to resources improve efficiency Integration of Su
Slide 27: Improving regulated remuneration
Improving regulated remuneration: focus on achieving and consolidating regulatory developments The 2007 tariff considers an R0 update of the overall remuneration level and by company which for Endesa Achieved represented a (euro)245M increase in revenues (a rise of 16.7%) Change in formula for updat
Slide 28: Developing variable income: reach 15% of gross margin in 2009
Developing variable income: reach 15% of the gross margin of Endesa Red in 2009 Specific plan to boost income by: Regulated o Hiring equipment non-liquid o Connection and verification charges income o Execution of standard connections o "Turn-key" projects for client installations o Measurement and
Slide 29: Efficiency in Organisational and Human Resources
Efficiency in Organisational and Human Resources: moving towards an optimised model which is reducing personnel expenses and taking action on productivity GWh / employee 20 +28% 19 18 17 16 15 14 13 12 11 10 2005 2006 2007 2008 2009 How: Integration synergies Provision already made for pre-retiremen
Slide 30: Integrating Suppliers
Integrating Suppliers: will help meet the target for reducing unitary costs and improving the quality, schedule and security of work carried out by contractors (euro)M 90 Other contracts Initiatives underway: 75 Specific tenders Revision of services master 263 contracts HV Master contracts New contr
Slide 31: Energy Efficiency
Energy Efficiency: will help increase the financial efficiency of the distribution network by over 350 GWh (equivalent of (euro)17M) in the period 07-11 Initiatives to drive energy efficiency Initiatives to reduce losses: and savings: Reduce losses and structural changes in the Re-locate MV frontier
Slide 32: Capacity and Quality: investment required to maintain quality of service
Capacity and Quality: investment required to maintain the quality of service and assimilate market growth, levelling at (euro)55 per client and year Investments o Distribution Networks R&D excellence centre o Distribution Innovation Circles (CIDE) o CENIT Project for development of advanced technolo
Slide 33: Transmission: crystallise value of the business
Transmission: crystallise value of the business Background: The transposition of the EU Directive enforces the disposal of certain of our secondary transmission assets In 2003 mainland transmission assets were sold to REE. At that time, Endesa maintained its transmission business, which allowed us g
Slide 34: Remote management: to improve competitiveness
Remote management: to improve competitiveness and improve commercial and technical processes Advantages: Regulatory requirements: o The Endesa Standard allows compatibility between equipment from various providers New 3 period digital o Improvements for Endesa (commercial and technical meters soon t
Slide 35: Remote management: to improve competitiveness
Remote management: to improve competitiveness and improve commercial and technical processes Advantages: Regulatory requirements: New 3 period digital meters soon to be in place since the introduction RD about consumption points. Current metering portfolio will have to be replaced between 2015 and 2
Slide 36: Specific plans on diverse aspects of Management (1 of 2)
Endesa Red also develops specific plans on diverse aspects of Management (1 of 2) Technolo- Ensures the implementation of the most appropriate technology gical Plan to each activity to improve quality of service and lower costs Project META 24% reduction in average time for resolving grid incidents
Slide 37: Specific plans on diverse aspects of Management (2 of 2)
Endesa Red also develops specific plans on diverse aspects of Management (2 of 2) Technical Identification of the service features which are most valued by service clients and process definition to improve the service (towards a services company) Project IT application on domestic customer metering
Slide 38: Contents
Contents Endesa Red now Results obtained Regulatory framework Our "route map": Strategic plan A future of growth and profitability 37
Slide 39: Moderate investment in the near future maintaining quality of service
Investments made in the recent past tolerates moderate investment in the near future, maintaining the quality of service and assimilating the market growth Sales and Quality of Supply 115 5,3 4,71 113 110 4,8 110 Relevant investments in recent 4,3 / year) 105 3,73 104 years 3,8 100 100 The quality o
Slide 40: Endesa Red faces an environment of growing income
2003 2004 2005 2006 2007 2008 2009 Endesa Red faces an environment of growing income Regulated margin improvement Greater margin for "Other Income" net of variable expenses Increase in Gross Margin Fixed unitary costs reduction Increase in EBITDA Adjustment of investments, divestments Increase in Ca
Slide 41: Summary
Summary The main strength of Endesa Red nowadays is its strong generation of EBITDA, with a sustained high growth rate and a leading quality of service Regulated market stability + Solid growth of the business Greater + EBITDA Improvement of regulated revenues + Emergent non-regulated income + Highe
Slide 42: Legal Information
Legal Information 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 Comision Nacional del
Slide 43: Signatures
Endesa Red Growth and Profitability Jose Luis Marin Lopez-Otero Chief Executive Endesa Red Valencia, June 25, 2007 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly