Endesa S.a. · BME:ELE
Endesa — Q1 2007 Earnings Presentation
55 slides from Endesa's earnings presentation, May 4, 2007
Slide 1: 1Q 2007 Results
1Q07 Results Strong growth across the businesses 1Q 2007 Results May 4, 2007
Slide 2: 1Q 2007 Results
1Q 2007 Results Results in line with 2007 targets Strong like-for-like growth in a demanding scenario Dividend in line with the announced target 1
Slide 3: Positive results in 1Q07
RESULTS SUMMARY Positive results in 1Q07 €M 1Q 2006 Change Like-for-like 1Q 2007 change(1) Revenues 5,274 5,069 -4% +0% Gross margin 2,734 2,820 +3% +12% EBITDA 1,947 2,000 +3% +15% EBIT 1,491 1,443 -3% +13% Net financial expenses -232 -236 +2% -10% Net income 1,052 633 -40% +11% 31/12/06 31/03/07 L
Slide 4: Sound results thanks to diversified portfolio
RESULTS SUMMARY Sound results thanks to diversified portfolio EBITDA: €2,000M EBIT: €1,443M Latam Spain and Latam Spain and 33% Portugal 37% 47% Portugal 51% Rest of 16% 16% Rest of Europe Europe Net income: €633M Latam 15% Spain and 16% 69% Portugal Rest of Europe 3
Slide 5: Efficiency Improvement Plan: ahead of schedule
RESULTS SUMMARY Efficency Improvement Plan: ahead of schedule EBITDA improvement due to Efficiency Plan 695 171 €M 139 385 55 1Q07 incr. growth: • Spain and Portugal: €36M • Europe: €17M 204 • Latin America: €2M 181 2005 2006 2007 2008-2009 Total 2009 63% of 2009 target already achieved 4
Slide 6: Results in line with targets
RESULTS SUMMARY Results in line with targets EBITDA €M +8% 7,440 7,139 227 6,020 +15% 212 1Q 2,000 1,486 1,735 (1) 2005 2006 2007 target (1) Stripping out recognition of revenues for the non-mainland generation extra costs in 2001-2005: €212M in 1Q06, and €227M for FY06. 5
Slide 7: Dividend in line with the announced target
RESULTS SUMMARY Dividend in line with the announced target Payment of 2006 dividend: €1.64/share - Interim dividend of €0.50/share paid in January - Final dividend of €1.14/share Dividend target 2006 €/share Ordinary Total 100% activities + capital gains = Dividend +12% 0.37 1.64 2,0950 1.27 1.1
Slide 8: Spain and Portugal
1Q07 Results 1Q07 Results Strong growth across all businesses Spain and Portugal 7
Slide 9: Strong earnings growth
SPAIN AND PORTUGAL Strong earnings growth €M 1Q 2007 Change Like-for-like 1Q 2006 change(1) Revenues 2,578 2,405 -7% +2% Gross margin 1,527 1,515 -1% +15% EBITDA 1,037 1,027 -1% +24% EBIT 773 684 -12% +22% Net financial expenses -81 -74 -9% -34% Net income 568 437 -23% +23% ( 1 ) Stripping out the n
Slide 10: Strong EBITDA growth
SPAIN AND PORTUGAL Strong EBITDA growth EBITDA Highlights €M 1,037 +24% 1,027 Leadership and margin Non-mainland deficit 212 enhancement in deregulated Generation + business Supply +12% 661 Lower CO2 emissions and 590 cost Contribution to margins from +56% gas business 366 Distribution 235 D
Slide 11: Selective and profitable supply policy
SPAIN AND PORTUGAL Selective and profitable supply policy Electricity sales (GWh) Equivalent energy price in the deregulated market (€/MWh) 16% Deregulated market 51% 9,634 GWh, +0.3% +21% 1.1 mill customers, +7.4% 50.2 56% share, +7pp. 41.6 84% 49% Wholesale Market Rest of the sector Endesa 1
Slide 12: Leadership and revenue enhancement in deregulated business
SPAIN AND PORTUGAL Leadership and revenue enhancement in deregulated business Generation revenue from Average revenue from mainland sales to: generation(1) and pool price €/MWh €/MWh Wholesale market Deregulated market Avg. 73.8 revenues: 56.2 -2,3% 50.2 51.3 50.1 43.1 43,1 Pool price: -41,6% Wholes
Slide 13: Competitive mainland fuel costs thanks to efficient use of generation portfolio
SPAIN AND PORTUGAL Competitive mainland fuel costs thanks to efficient use of generation portfolio Mainland fuel cost in Load factor of thermal Ordinary Regime plants (2) vs. rest of the sector €/MWh 20.0 65.8% 15.7 49.5% Endesa Rest of the Sector (1) Endesa Rest of the sector Even in a scenario w
Slide 14: Lower emissions and CO2 costs
SPAIN AND PORTUGAL Lower emissions and CO2 costs Mainland x Closing price of CO2 = Economic impact (1) emissions deficit Mton CO2 €/tn €M Deficit 9,5 40 1Q06 1,8 21.88 1Q06 -11% -85% Deficit 1,9 1.26 1Q07 2 4 6 1Q07 8,5 Depreciation of portfolio (2) (1) Also, the updated value of CO2 rights in the 2
Slide 15: Contribution to margins from natural gas business
SPAIN AND PORTUGAL Contribution to margins from natural gas business Natural gas sales (GWh) (1) Gross margin (M€) 8,759 +30% 64 6,739 +129% 28 1Q 06 1Q 07 1Q 06 1Q 07 Endesa obtained a 13.1% share of the deregulated gas market It is a strong source of additional margins, offering our customers
Slide 16: Distribution: strong growth in EBITDA and quality of supply
SPAIN AND PORTUGAL Distribution: strong growth in EBITDA and quality of supply Increase in Distribution EBITDA €M 60 131 18 53 Improved Activity Operational Incr. Distribution remuneration improvements EBITDA Distribution EBITDA improved largely due to better remuneration, fewer losses and optimis
Slide 17: Results in line with 2007 targets
SPAIN AND PORTUGAL Results in line with 2007 targets EBITDA +11% 4,010 3,835 €M 227 3,266 +24% 212 1,027 1Q 825 824 2005 2006 (1) 2007 target (1) Stripping out revenues recognized for non-mainland generation extra cost in 2001-2005: €212M in 1Q06, and €227M for FY06. 16
Slide 18: Europe
1Q07 Results 1Q07 Results Strong growth across all businesses Europe 17
Slide 19: Solid results in a unfavorable market environment
EUROPE Solid results in a unfavorable market environment 1Q 2006 1Q 2007 Change Like-for-like €M change(1) Revenues 1,165 1,029 -12% Gross margin 407 398 -2% +4% EBITDA 322 310 -4% +5% EBIT 257 224 -13% -3% Net financial expenses -11 -18 +64% +64% Net income 118 100 -15% -4% 18 (1) Stripping out the
Slide 20: Like-for-like EBITDA growth in a demanding scenario
EUROPE Like-for-like EBITDA growth in a demanding scenario EBITDA Highlights €M Fall in demand due to high +5% (1) 322 310 temperatures Delibera 26 Decrease in activity Margins increased despite 247 Endesa Italia falling prices 234 Progress in the renewables capacity plan Energy management
Slide 21: Endesa Italia: Wider margins offset lower activity
EUROPE Endesa Italia: Wider margins offset lower activity Origin and Destination of Sales (1) (GWh) Decrease in activity : 2% fall in 8,501 8,501 demand (warm weather), low rainfall and more imports Imports 9% Supply 66% & large Increase in unit margin: Other customers purchases 16% Hedge by b
Slide 22: Endesa France: EBITDA growth in a low energy prices scenario
EUROPE Endesa France: EBITDA growth in a low energy prices scenario Breakdown of sales (GWh) -23% 6,032 4,653 Decrease in activity: Strong decline Poland 12% 12% in demand (approx. -8%) and prices Supply 34% 18% Increase in unit margin: Output hedged with forward and EdF contracts Forward and 25
Slide 23: Integrated management of asset portfolio
EUROPE Integrated management of asset portfolio 20 GWh 7 GWh 5 GWh Trading EBITDA: €15M 16 GWh 25 GWh Additional contributions: Physical assets - Endesa Italia: €11M 18 GWh Virtual assets - Endesa France: €5M Interconnection 776 GWh 15 GWh 100 GWh 22
Slide 24: Greece: strategic alliance with Mytilineos group
EUROPE Greece: strategic alliance with Mytilineos group One of the most attractive markets in Europe Lack of capacity 50.01% 49.99% High prices Barriers to entry NEWCO Endesa Hellas: Joint Venture with the Mytilineos Group Assets (MW) Date of Operation CHP 511 June 2007 Contribution to Endesa:
Slide 25: Results in line with 2007 targets
EUROPE Results in line with 2007 targets EBITDA €M +12% 1,116 1,150 86 887 +5% 26 310 1Q 234 296 2005 2006 (1) 2007 target 24 (1) Stripping out the non-recurrent effect for regulatory items: €26M in 1Q06 and €86M in FY06
Slide 26: Latin America
1Q07 Results 1Q07 Results Strong growth across all businesses Latin America 25
Slide 27: Strong growth in operating results
LATIN AMERICA Strong growth in operating results €M 1Q 2006 1Q 2007 Change Like-for-like change (1) Revenues 1,531 1,635 +7% Gross margin 800 907 +13% EBITDA 588 663 +13% EBIT 461 535 +16% Net financial expenses -140 -144 +3% Net income before taxes and minorities 341 394 +16% Net income 195 96 -51%
Slide 28: Strong growth across all businesses
LATIN AMERICA Strong growth across all businesses EBITDA €M +13% 663 Highlights 588 335 Generation Sharp growth in demand in all countries 309 Strong growth in output and sales Significant improvement in 349 Distribution generation and distribution 277 margins Cash returns in line with the S
Slide 29: Strong growth in output and sales
LATIN AMERICA Strong growth in output and sales Output (GWh) Sales (GWh) +6.3% +7.2% 15.268 15.711 14.363 14.656 Argentina 3,985 4,674 3,664 4,580 982 Brazil 1,080 4,084 3,940 5,192 Chile 4,369 3,005 3,157 Colombia 2,976 2,745 2,545 2,750 Peru 1,651 2,118 1,209 1,292 1Q 06 1Q 07 1Q 06 1Q 07 Strategi
Slide 30: EBITDA growth in Generation, largely due to Chile
LATIN AMERICA EBITDA growth in Generation, largely due to Chile EBITDA Generation (€M) Generation margin (USD/MWh) +8% 335 309 Strategic 38 Argentina 34 Plan CAGR +4.5% 38 Brazil 2004-2009 34 +15% 29.7 133 169 Chile 25.9 63 48 Colombia 45 42 Peru 1Q 06 1Q 07 1Q06 1Q 07 Significant contribution fro
Slide 31: Strong EBITDA growth in distribution, especially in Argentina and Brazil
LATIN AMERICA Strong EBITDA growth in distribution, especially in Argentina and Brazil EBITDA Distribution (€M) Distribution margin (USD/MWh) 349 +26% Strategic 61 Argentina Plan CAGR +2.6% 277 2004-2009 25 +13% Brazil 154 39.2 (1) 117 34.8 50 51 Chile 63 58 Colombia 22 25 Peru 1Q 06 1Q 07 1Q 06 1Q
Slide 32: Cash returns in line with the Strategic Plan
LATIN AMERICA Cash returns in line with the Strategic Plan USD million 2005-06 1Q07 Total Dividends and interest 207 111 318 Capital reductions & others 327 7 334 Divestments 27 27 561 118 679 Achieving 42% of the Strategic Plan 2005-09: USD1,600M Also, approx. USD170M from Enersis dividend (May
Slide 33: Enersis and Endesa Chile, trading at highest levels
LATIN AMERICA Enersis and Endesa Chile, trading at highest levels Stock market performance Stock market Market cap over last 5 years increase (US$M) Endesa Historical Chile +417% 13,140 maximum (ADR) level 6-year Enersis +110% 12,538 maximum (ADR) level 2002 2003 2004 2005 2006 2007 Stock market p
Slide 34: Results in line with 2007 targets
LATIN AMERICA Results in line with 2007 targets EBITDA +4% 2,280 €M 2,188 1,878 +13% 588 663 1Q 432 2005 2006 2007 target 33
Slide 35: Financial analysis
1Q07 Results 1Q07 Results Strong growth across all businesses Financial analysis 34
Slide 36: Positive cash flow
FINANCIAL ANALYSIS Positive cash flow €M 1,312 667 567 379 418 227 152 36 Cash Flow Capex Cash Flow Capex Cash Flow Capex Cash Flow Capex Spain & Portugal Rest of Europe Latin America Group 35
Slide 37: Debt performance
FINANCIAL ANALYSIS Debt performance €M By By company Businesses +4% 19.840 815 227 20.556 20.556 1,008 1,312 22 17.743 Latam 5,695 4,864 5,618 Enersis 806 E. Italia Europe 1,609 1,674 Spain, Spain, 14,886Portugal Portugal 12,548 13,252 and other and other Net debt at Cash Investments + Dividends Exc
Slide 38: Recognised regulatory items pending collection
FINANCIAL ANALYSIS Recognised regulatory items pending collection 1,449 10 €M 2,813 1,238 116 Mainland Deficit Historical Stranded Total deficit 2007 Non-mainland Costs 2006 deficit Italy 37
Slide 39: Favourable debt structure in a context of rising interest rates
FINANCIAL ANALYSIS Favourable debt structure in a context of rising interest rates Debt structure Debt structure: €20,556M €20,556M Fixed-rate or hedged debt: 64% Other 9% Floating 36% Chilean Peso 4% Debt in currency in which cash flow is generated USD 11% Average cost of debt: 5.63%: End
Slide 40: Conclusions
CONCLUSIONS Conclusions Solid earnings in a demanding scenario Diversified business portfolio in highly attractive markets Expected results in line with announced targets Active management of the businesses: growth, efficiency and investments. An experienced and committed team 39
Slide 41: Back-up
1Q07 Results Strong growth across all businesses Back-up 40
Slide 42: Generation output in Spain and Portugal
SPAIN AND PORTUGAL Generation output in Spain and Portugal Endesa's mainland generation output (GWh) Changes for Changes for 20,008 -2.8% 19,457 ENDESA rest of the sector 615 823 Renew/CHP 403 98 Renew/CHP Renew/CHP Fuel 2,030 1,739 CCGT +33.8% +12.0% Conventional Conventional 8,717 8,247 thermal: t
Slide 43: Competitive mainland fuel costs
SPAIN AND PORTUGAL Competitive mainland fuel costs Breakdown of mainland unit Breakdown of impact on fuel costs fuel costs €M €/MWh 1Q06 1Q07 % chg +21 -43 CCGT (1) 36.8 37.7 2.3% Domestic coal (2) 21.5 22.8 5.9% 315 Imported coal 19.1 18.9 -1.3% Increase in 293 raw material Fuel 69.0 154.7 124% pri
Slide 44: Renewables and CHP technologies have been strongly affected by the drop of pool prices
SPAIN AND PORTUGAL Renewables and CHP technologies have been strongly affected by the drop of pool prices Sales (€M) EBIT (€M) -17% -11% 83 141 69 37 33 1Q 06 1Q 07 1Q 06 1Q 07 Output(1) 615 +34% 823 GWh GWh Sale price 101.1 -19% 81.7 renewable /CHP €/MWh €/MWh 43 (1) Accounting output (correspondin
Slide 45: Renewable and CHP: Operating magnitudes
SPAIN AND PORTUGAL Renewable and CHP: Operating magnitudes 1Q 06 1Q 07 MW Net Accounting Gross Net Accounting Gross Total 1,385 1,047 2,171 1,589 1,286 2,381 CHP 246 34 533 211 39 452 Installed Wind 919 826 1,280 1,136 1,038 1,549 capacity Minihydro 174 165 218 196 187 240 Other 46 22 140 46 22 140
Slide 46: Favourable shift in the regulatory environment
SPAIN AND PORTUGAL Favourable shift in the regulatory environment Developments expected Quarterly tariff update Tariffs Elimination of high voltage customers tariff by 2010 RDL 3/2006 applied to 2006 Virtual capacity auctions (VPP): gradually up to 1,000 MW per bidder Wholesale Energy auct
Slide 47: E. France: Output and installed capacity
EUROPE Output and installed capacity Output (GWh) Installed capacity (MW) 7,619 -17% 6,590 +7% 7,062 152 Wind 9 6,354 20 45 Wind 3,292 2,400 2,740 CCGT Italy 3,460 CCGT 839 2,180 2,180 Hydro 1,619 422 Hydro 1,556 Coal Coal 976 976 1,860 Fuel Gas 871 Fuel Gas 1,014 1,014 1Q06 1Q07 1Q06 1Q07 +1% 2,947
Slide 48: Progress in streamlining ownership structure
LATIN AMERICA Progress in streamlining ownership structure Carried out October 2005 Creation of Brazilian holding IFC acquired stake (2.7%) in Endesa Brasil Chilectra - Elesur Carried out March 2006 merger Etevensa - Edegel Carried out June 2006 merger More balanced Approved by generation
Slide 49: Breakdown of EBITDA growth by business line: 2006-09
FINANCIAL ANALYSIS Breakdown of EBITDA growth by business line: 2006-09 EBITDA €M 8,500 7,960 7,440 1,400 7,139 1,280 Rest of 1,150 1,116 Europe 2,470 2,360 2,280 Latin America 2,188 4,320 4,630 Spain and 3,835 4,010 Portugal 2006 2007E 2008E 2009E 48
Slide 50: Net income target growth
FINANCIAL ANALYSIS Net income target growth €M Net income 3,075 2,969 2,830 2,620 Capital gains from divestments 2,970 2,576 2,720 2,470 Ordinary income 2006 2007E 2008E 2009E 49
Slide 51: Debt structure aligned with needs and business risk
FINANCIAL ANALYSIS Debt structure aligned with needs and business risk Currency hedging Interest rate hedging Currency Debt €M Interest rates Debt €M 15,692 4,864 20,556 15,692 4,864 20,556 9% Others 4% Chilean peso 37% 19% Floating 11% USD rate 42% 5% 36% 18% Hedged 100% 10% Euro 11% 76% 76% 45% Fi
Slide 52: ENDESA debt maturities excluding Enersis
FINANCIAL ANALYSIS ENDESA debt maturities excluding Enersis Balance of debt maturities: €16,196M (1) 9,209 €M 4,583 Bonds Bank debt Promissory notes (2) 2,308 2,152 332 1,281 1,813 34 844 306 1,976 402 4,626 235 941 392 339 579 30 10 2Q07 2H07 2008 2009 2010 2011 + ENDESA's liquidity exluding Enersi
Slide 53: Enersis debt maturities
FINANCIAL ANALYSIS Enersis debt maturities Balance of debt maturities: €5,544M (1) 2,725 €M Bonds Bank debt 627 936 946 303 498 534 2,098 207 196 643 332 438 52 155 181 15 202 2Q07 2H07 2008 2009 2010 2011 + Enersis' liquidity is €1,295M (€760 in cash and €535M in available syndicated loans), suffic
Slide 54: 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 Comisión Nacional del
Slide 55: 1Q 2007 Results
1Q07 Results Strong growth across all businesses 1Q 2007 Results May 4, 2007 54