Endesa S.a. · BME:ELE
Endesa — FY2005 Earnings Presentation
61 slides from Endesa's earnings presentation, Jan 18, 2006
Slide 1: 2005 Results
Resultados 1S 2005 Fuerte crecimiento en todos los negocios 2005 Results Endesa: stronger business, greater value 18 January 2006 0
Slide 2: Endesa: stronger business, greater value
Endesa: stronger business, greater value Excellent 2005 results Outstanding prospects for 2006 Trend clearly exceeding 2009 targets Reaffirming Endesa’s greater value 1
Slide 3: Excellent 2005 results
Excellent 2005 results €M 2004 2005 Change Sales 13,509 17,508 +30% Gross Margin 7,373 9,126 +24% EBITDA 4,521 6,020 +33% EBIT 2,846 4,244 +49% Net financial expenses -1,087 -1,257 +16% Net income (ex. asset disposals) 1,149 1,841 +60% Net income 1,253 3,182 +154% 01.01.05 31.12.05 Change Financial
Slide 4: Strong growth in all businesses
Strong growth in all businesses EBITDA: €6,020M EBIT: €4,244M +33% +49% Spain and Latam Spain and Latam Portugal Portugal +31% +23% +32% +58% 31% 54% 32% 53% 15% 15% Europe Europe +66% +67% Net Income: €3,182M +154% Spain and Portugal Auna and +53% others N.A. 36% 43% Latam +106% 8% 13% Europe +151%
Slide 5: 2005 results exceed targets
2005 results exceed targets EBITDA Net Income 2005 vs. 2004 (%) 2005 vs. 2004 (%) 2004-2009 announced 10-11% (CAGR) >12% (CAGR) target 2005 forecast 27% 35%1 - >100% (16 Nov. 05) 2005 results 33% 60%2 -154% € 6,020 M € 1,841 M – € 3,182 M 2 1 Auna disposal included 2 Without including disposals 4
Slide 6: Sustainable growth in each quarter of 2005
Sustainable growth in each quarter of 2005 Quarterly EBITDA in 2005 (€M) 1,575 1,621 Average 05 1,486 1,505 1,338 +33% Average 04 1,130 Q1 Q2 Q3 Q4 5
Slide 7: Progress in Efficiency plan above committed target
Progress in Efficiency plan above committed target 2005 EBITDA improvement due to Efficiency plan €M 56 2 181 123 Spain and Portugal Europe Latin America Total Efficiency plan Target 320 140 65 525 2004-2009 (€M) % of target achieved 38% 40% 3% 34% 6
Slide 8: Non-strategic asset disposals in excess of €3,000M in 2005
Non-strategic asset disposals in excess of €3,000M in 2005 Disposals €M 3,184 303 122 130 408 2,221 Net capital gains of €1,341 M Auna Smartcom Real Estate Sidec + Lydec Others Total Assets 7 Note: Does not include sale of 5.01% of AUNA (€378 M cashed in 2005) to be accounted for in Q1 2006
Slide 9: 2005 Dividend: €2.4/share
2005 Dividend: €2.4/share Ordinary 100% Total activities + Capital = dividend >12% gains x 3.3 €/share 1.2666 2.4000 Complementary 2.0950 +54% dividend 1.1334 0.7382 Interim 0.3050 dividend 2004 Ordinary Disposals 2005 total dividend business 2005 dividend First year dividend of €2,541M out of more
Slide 10: Spain and Portugal
2005 Results Resultados 1S 2005 Fuerte crecimiento en todos los negocios Spain and Portugal 9
Slide 11: Strong growth in results
SPAIN AND PORTUGAL Strong growth in results €M 2004 2005 Change Sales 6,648 8,761 +32% Gross margin 4,352 5,202 +20% EBITDA 2,472 3,266 +32% EBIT 1,432 2,264 +58% Net financial expenses -501 -602 +20% Net Income 888 1,358 +53% 10
Slide 12: 2005 Highlights
SPAIN AND PORTUGAL 2005 Highlights Industry trends Strong growth in demand (+4.6%) High pool prices (€61.7/MWh) Endesa’s strength Regulatory improvements: - Total recognition of 2005 tariff deficit - Increased islands remuneration Strong recurring growth: - Competitive mix management - Effic
Slide 13: Strong recurring growth
SPAIN AND PORTUGAL Strong recurring growth Recurring EBITDA Growth* (€M) 3,266 203 Islands deficit 2001-04 +24%* Very competitive mainland fuel 2,472 cost Margin stability despite hydro 2,174 Generation + Supply seasonality 1,571 High growth in the gas business Efficiency plan 901 889 Distri
Slide 14: Very competitive mainland fuel cost
SPAIN AND PORTUGAL Very competitive mainland fuel cost Endesa Rest of Sector (e) €/MWh €/MWh 21.4 +48% +26% 16.4 14.5 13.0 2004 2005 2004 2005 More competitive generation portfolio than rest of sector in varying hydro conditions (2004 and 2005) Less affected by volatility in raw materials market
Slide 15: Stable output despite hydro seasonality
SPAIN AND PORTUGAL Stable output despite hydro seasonality Endesa mainland generation (GWh) 82,528 -3% 79,811 1,773 Renewables/CHP 2,120 Unusual circumstances: 1,637 2,417 Fuel 6,039 7,757 CCGT - Unavailability of Vandellós (2,600 GWh) - Conversion of As 37,203 Coal Pontes Group 4 (700 +6% 37,018
Slide 16: Strong growth in the gas business
SPAIN AND PORTUGAL Strong growth in the gas business 2004-2005 Growth (%) Distribution +13% 8,197 GWh Liberalised market +58% 18,558 GWh Generation consumption +34% 22,222 GWh Procurement +58% 3.6 bcm Very strong growth in all businesses Endesa achieved a 12% market share in consumption, meeting
Slide 17: 60x5 Efficiency plan exceeds 2005 targets
SPAIN AND PORTUGAL 60x5 Efficiency plan exceeds 2005 targets Fixed Costs (€M) Fixed Costs (€M) Quarterly evolution 2005 vs. 2004 Total year 2005 vs. 2004 +0,8% 2,075 Extraordinary 13% 13% provisions1 -4% 2,013 2,029 -3% Excluding -10% extraordinary provisions1 1Q05 2Q05 3Q05 4Q05 2004 2005 60x5 Ef
Slide 18: Progress in Capacity plan
SPAIN AND PORTUGAL Progress in Capacity plan As Pontes Group 4 came into operation in 2005 conversion to imported coal Completion of the conversion expected by 2008 2006: Commissioning of Colón CCGT plant (400 MW) Progress in the 2007: Commissioning of As Pontes CCGT plant (800 MW) construct
Slide 19: Favourable tariff revision for 2006
SPAIN AND PORTUGAL Favourable tariff revision for 2006 January 2006 June 2006 4.48% nominal increase Additional increase of 1.5%-2% Total effect of 6% (lower nuclear expected 2006 tariff moratorium and others) Income increase higher than 10% (includes increase in demand) Full tariff defici
Slide 20: Outstanding prospects for 2006
SPAIN AND PORTUGAL Outstanding prospects for 2006 EBITDA (€M) 2004-2009 CAGR 10-12% 4,200 Efficiency improvements: €200M accumulated in 2006 +11% 3,620 3,266 Capacity plan: +32% - CCGT: 400 MW 2,472 - Renewables: 395 MW - Islands: 580 MW Atypical production constraints disappear (Vandellós)
Slide 21: Europe
2005 Results Resultados 1S 2005 Fuerte crecimiento en todos los negocios Europe 20
Slide 22: Excellent results underscore strength of European business
EUROPE Excellent results underscore strength of European business €M 2004 2005 Change Sales 2,557 3,598 +41% Gross margin 830 1,223 +47% EBITDA 535 887 +66% EBIT 370 618 +67% Net financial expenses -63 -63 +0% Net Income (ex. asset 169 257 +52% disposals) 1 Net Income 169 425 +151% 1 Also excludes €
Slide 23: 2005 Highlights
EUROPE 2005 Highlights Italy Increase in installed capacity and generation Unit margin increase due to efficiency improvement and production mix France Roll-out of Efficiency plan Increased unit margin due to market risk management Disposal of non-strategic assets (Sidec) Morocco Commiss
Slide 24: Endesa Italia: Strong increase in EBITDA and Net Income
EUROPE Endesa Italia: Strong increase in EBITDA and Net Income EBITDA (€M) Net Income (€M) +36% 694 +103% 443 510 218 2004 2005 2004 2005 Generation, sales and margin increase +43% increase excluding €134M Recognition of €169M of stranded positive fiscal effect from revaluation costs (€33M acc
Slide 25: Italy: Increase in installed capacity and output
EUROPE Italy: Increase in installed capacity and output Output (GWh) +12% 23,362 20,865 30% Capacity (MW) 50% CCGT +4% 11% Energy sales (GWh) 27% 10% Hydro +18% 24% Coal Sales margin (€/MWh) 31% Fuel Gas +6% 16% 2004 2005 Completion of Ostiglia and Tavazzano repowering (2,400 MW CCGT on stream)
Slide 26: Italy: sustaining margins despite declining prices
EUROPE Italy: sustaining margins despite declinig prices Efficiency plan €16M of the efficiency plan already achieved in 2005 Growth in renewables Wind projects portfolio of 700 MW - 20 MW operating - 316 MW committed (136 MW will be operating by mid-2006) LNG regasification terminals in Livorno
Slide 27: France: growth based on operating improvements
EUROPE France: growth based on operating improvements EBITDA (€M) Market risk management (EdF contracts) +21% 179 and unit margin improvement (+7%) Implementation of Efficiency plan 148 - Reduction of O&M costs: -23% - Reduction of fixed costs: -€26M - Reduction of Employee/MW ratio: -16% - Redu
Slide 28: Poland: final proceedings for Dolna Odra
EUROPE Poland: final proceedings for Dolna Odra Process: Agreement achieved with Polish Government Brussels authorisation obtained Pending agreement with labour unions Targets: Return > 12 % Double EBITDA by 2009 Accreative from outset 27
Slide 29: Energy management: €46M EBITDA and additional savings
EUROPE Energy management: €46M EBITDA and additional savings Management of interconnections - Assigned 35% of total auctioned capacity in the France-Italy interconnection in 2005 (RTE) - Other interconnections: Italy- EBITDA Endesa Trading: €46M Slovenia Supply to customers: Additionally: Portfolio
Slide 30: Outstanding prospects for 2006
EUROPE Outstanding prospects for 2006 EBITDA (€M) 2004-2009 CAGR 13-15% 1,050 +17% 1,040 Poland 887 Poland included: €80m +66% 960 Growth in renewables: 100 MW 535 Efficiency plan: Achieving 2009 target by 2007 2004 2005 2006 2009 Estimate Trend clearly exceeding 2009 targets 29
Slide 31: Latin America
2005 Results Resultados 1S 2005 Fuerte crecimiento en todos los negocios Latin America 30
Slide 32: Strong growth in results
LATIN AMERICA Strong growth in results €M 2004 2005 Change Sales 4,297 5,149 +20% Gross margin 2,180 2,698 +24% EBITDA 1,522 1,878 +23% EBIT 1,054 1,376 +31% 1 Net financial expenses -453 -540 +19% Net Income before minorities 431 710 +65% Net Income 127 262 +106% 31
Slide 33: 2005 Highlights
LATIN AMERICA 2005 Highlights Favourable environment Widespread growth in production (+5.1%) and sales (+5.6%) General recovery in currency values Earnings growth EBITDA increases across businesses and countries Unit margins improved: - Capturing regulatory improvements - Improving energy an
Slide 34: Improvement in unit margins
LATIN AMERICA Improvement in unit margins Generation margin USD/MWh VAD distribution USD/MWh 2004-2009 +4.5% CAGR +2.6% CAGR Strategic plan 30.3 +9.9% +28.9% 21.1 23.5 19.2 2004 2005 2004 2005 Capturing regulatory improvements: - Increase in node prices in Chile; tariff review for Chilectra, Ampla
Slide 35: Progress in key subsidiary restructurings
LATIN AMERICA Progress in key subsidiary restructurings Endesa Brasil Before Current Endesa Endesa Endesa Enersis Chilectra Endesa Enersis Chilectra Internac Chile Chile 100% Endesa Brasil 35.1% 10.7% 46.7% 48.8% 51.2% 55.0% 45.0% 99.6% 15.6% 37.6% 4.6 million customers 10.4% 36.4% 997 MW of ins
Slide 36: Cash returns to Spain in line with targets
LATIN AMERICA Cash returns to Spain in line with targets 2004 2005 Strategic plan US$ M US$ M 2004-2009 Dividends and interests 46 86 750 received Capital reductions 221 195(1) 250 Disposals 8 27(2) Total 275 308(3) 1,000 1 Includes income from Elesur of USD41M 2 Sale of CEPM for USD 24 M and EEB sh
Slide 37: Outstanding prospects for 2006
LATIN AMERICA Outstanding prospects for 2006 EBITDA (€M) 2004-2009 CAGR 7-9% 2,250 +10% 2,065 Demand growth 1,878 +23% Price evolution 1,522 Generation-Distribution tariffs in Argentina New capacity in Peru (61 MW) 2004 2005 2006 2009 Estimate Trend clearly exceeding 2009 targets 36
Slide 38: Financial Analysis
2005 Results Resultados 1S 2005 Fuerte crecimiento en todos los negocios Financial Analysis 37
Slide 39: Positive Cash Flow in all businesses
FINANCIAL ANALYSIS Positive Cash Flow in all businesses €M + 35% +25% 2,669 2,448 +15% 1,180 586 611 283 Cash Flow Capex Cash Flow Capex Cash Flow Capex Spain and Portugal Europe Latin America Free Cash Flow before dividends: € 2.644M Total financial investments of €298M 38
Slide 40: Debt reduction despite financing of tariff deficit
FINANCIAL ANALYSIS Debt reduction despite financing of tariff deficit By By -2,2 % Company Business €M 18,698 18,281 18,281 1,184 Enersis 4,081 4,209 920 970 5,207 Latin 6,109 718 America E. Italia 1,293 815 1,286 Europe Spain, Portugal 13,324 12,259 and other 10,886 Spain and Portugal Net Debt at C
Slide 41: Stable cost of debt in a rising interest rate environment
FINANCIAL ANALYSIS Stable cost of debt in a rising interest rate environment Key aspects Cost of debt Endesa ex-Enersis Total cost Enersis Stable average cost of debt 9.37% 8.79% Average life: 5.4 years 7.77% 7.05% Net debt/EBITDA: 3.1x Fixed-hedged/Total 5.48% 5.46% 5.17% debt=89% 5.05% E
Slide 42: Conclusion: excellent 2005 results
Conclusion: excellent 2005 results Annual Commitment 2005 Achieved to 2009 EBITDA growth: +10-11% +33% 9 Net Income growth: >12% 60-154% 9 Growth in dividend from ordinary activities: ≥12% 54% 9 Dividend from 100% 1,341 M€ disposals: capital gains 9 Financial Leverage: <1,4x 1.1x 9 First year divide
Slide 43: EBITDA: Outstanding prospects for 2006
EBITDA: Outstanding prospects for 2006 2004-2009 CAGR: 10-11% 7,500 +12% 6,725 6,020 +33% 4,521 2004 2005 2006 2009 Estimate Trend clearly exceeding 2009 targets 42
Slide 44: Net Income: Outstanding prospects for 2006
Net Income: Outstanding prospects for 2006 3,182 2,400 2,200 1,253 2004 2005 2006 2009 Estimate Trend clearly exceeding 2009 targets 43
Slide 45: Endesa: greater value
Endesa: greater value EBITDA Endesa (M€) … and on 2006 growth Consensus prospects outdated on 2005 results ... 6,725 e sa +12% End 6,020 5,816 +10% +6% IBES 5,467 4,521 2004 2005 2006 44
Slide 46: Endesa: stronger business, greater value
Endesa is already a global leader: -#1 in Spain -#3 in Italy and France -#1 in Latin America + Excellent 2005 results and 2006 prospects + Endesa: stronger business, greater value Trend clearly exceeding 2009 targets + Committed management team + Maximum priority on shareholder returns 45
Slide 47: Back up
2005 Results Resultados 1S 2005 Fuerte crecimiento en todos los negocios Back up 46
Slide 48: Diversified portfolio provides steady growth in operating indicators
SPAIN AND PORTUGAL Diversified portfolio provides steady growth in operating indicators Generation (TWh) Sales (TWh) +5% +12% 185.3 175.8 203.3 Latin 181.2 Latin 55.1 57.9 America 55.2 America +5.1% 52.3 +5.6% 33.8 Europe 25.0 Europe +34.7% 47.2 32.2 +46.8% Spain & Spain & 95.7 93.6 Portugal 96.7 10
Slide 49: Thermal production diminishes impact of hydro output fall
SPAIN AND PORTUGAL Thermal production diminishes impact of hydro output fall Endesa mainland ordinary Rest of industry ordinary regime regime generation (GWh) electricity generation (GWh) +7.7% 126,039 -3.8% 117,064 6,047 3,962 80,756 77,691 1,637 2,417 Fuel 22,373 40,327 6,039 7,757 CCGT +32% 37,20
Slide 50: Unitary fuel cost 2005 (€/MWh)
SPAIN AND PORTUGAL Endesa vs. Rest of industry. Generation profile provides lower variable costs Rest of industry (e) Endesa (€21.4/MWh) 65 Year 2005 (€16.4/MWh) Oil / Gas Unitary fuel cost 2005 (€/MWh) 60 Oil / Gas 55 50 45 40 35 CCGT 30 Domestic Coal 25 CCGT Imported Coal 20 Domestic Coal 15 Impor
Slide 51: Highly competitive mainland fuel costs
SPAIN AND PORTUGAL Highly competitive mainland fuel costs Breakdown of mainland unit fuel Breakdown of fuel cost costs increases (€M) €/MWh 2004 2005 Change Nuclear 3.5 3.5 1.7% 66 1,242 156 CCGT 26.3 30.4 (2) 15.7% 1,020 Higher Domestic coal (1) thermal 18.4 22.9 24.4% Increase in output raw Import
Slide 52: New pricing environment generates tariff deficits
0 5.000 10.000 15.000 20.000 25.000 en m e -0 m ar - 0 ay 0 0 - GWh/month j u 00 se -0 l p 0 no -0 0 e nv -0 0 m e -0 a m r- 1 ay 0 1 - j u 01 s e l- 0 p 1 Fuel Coal no -0 1 Hydro e nv -0 e 1 m -0 m ar - 2 ay 0 2 - j u 02 s e l- 0 2 no p-0 2002 v- 2 en 0 2 m e -0 Tariff Deficit a m r- 3 ay 0 3 j u -
Slide 53: Exceptionally high emission rights deficit due to low rainfall
SPAIN AND PORTUGAL Exceptionally high emission rights deficit due to low rainfall Balance of emission rights in 2005 Economic impact Impact aggravated by adverse hydro Mton CO2 Deficit conditions 8.5 CCGTs have consumed 105% of their annual allocated emission rights and coal plants consumed 125%
Slide 54: Growth in Renewables/CHP
SPAIN AND PORTUGAL Growth in Renewables/CHP Capacity (MW)1 Production (GWh)1 +8% 2,129 +11% 5,970 1,974 5,373 533 Cogen 540 2,353 2,092 1,123 1,249 Wind 1,917 2,493 147 149 149 610 202 207 Mini Hydro 562 29 29 140 754 562 140 Other 2004 2005 2004 2005 Sales (€M) EBIT (€M) +106% 232 +192% 99 113 34 2
Slide 55: High growth in production and sales
LATIN AMERICA High growth in production and sales Generation (GWh) Distribution (GWh) +5.6% +5.1% 55,246 57,890 52,314 55,106 +5% 14,018 +2% Argentina 13,322 16.154 15.884 4.213 -15% Brazil 14,753 +7% 4.889 13,769 18.764 +12% Chile 16.797 11,317 11,851 +5% Colombia 11.881 11.864 -0% 10,094 +5% 9,656
Slide 56: Credit Rating
LATIN AMERICA Higher trading levels of ENI and EOC and improved credit rating Price performance ADRs (%) % EOC ENI Performance 180 ADRs ENI EOC 170 2004 15.6% 55.9% 160 Cum. June 05 22.7% 36.5% 150 Cum. Sept. 05 34.4% 63.4% 140 130 Cum. Dici. 05 29.1% 67.9% 120 110 Market Cap 100 $US M ENI EOC 90 20
Slide 57: Debt structure aligned with business needs and risk
FINANCIAL ANALYSIS Debt structure aligned with business needs and risk Currency hedging Interest rate hedging Currency Debt Interest Rates €M Debt €M 13,074 5,207 18,281 13,074 5,207 18,281 2% 6% Other 11% 11% 11% 11% 21% 8% Chilean Peso 22% 19% Floating 14% 6% 3% 11% US Dollar Hedged 16% 11% 12% 27
Slide 58: Endesa Spain debt maturities
FINANCIAL ANALYSIS Endesa Spain debt maturities Gross balance of maturities outstanding as of 31 December 2005: €15,049M1 €M 4,996 650 Bonds Bank debt Notes (2) 2,472 2,600 2,229 405 4.346 1.162 1,613 469 1.013 688 451 2.590 578 1.824 361 841 600 110 90 10 1S06 2S06 2007 2008 2009 2010 2011 + ENDE
Slide 59: Enersis debt maturity
FINANCIAL ANALYSIS Enersis debt maturity Gross balance of maturities outstanding as of 31 December 2005: €5,784M1 2,186 217 €M Bonds Bank Debt 859 761 726 1,969 149 443 126 243 461 348 278 635 710 228 239 483 165 109 233 1S06 2S06 2007 2008 2009 2010 2011 + Enersis has liquidity of €863M to cover de
Slide 60: Important Legal Information
Important Legal Information Investors are urged to read Endesa’s Solicitation/Recommendation Statement on Schedule 14D-9 when it is filed with the U.S. Securities and Exchange Commission (the “SEC”), as it will contain important information. The Solicitation/Recommendation Statement and other public
Slide 61: 2005 Results
Resultados 1S 2005 Fuerte crecimiento en todos los negocios 2005 Results Endesa: stronger business, greater value 18 January 2006 60