Endesa S.a. · BME:ELE
Endesa — 9M 2006 Earnings Presentation
65 slides from Endesa's earnings presentation, Oct 25, 2006
Slide 1: 9M 2006 results: Endesa's greater value
9M 2006 results Endesa's greater value 25 October, 2006
Slide 2: Endesa's greater value
Endesa's greater value o Excellent results across all businesses o Interim dividend in line with the strong increase of results o Achieving targets beyond commitments o Project portfolio guarantees future growth
Slide 3: Excellent 9M 2006 results
Excellent 9M 2006 results RESULTS SUMMARY 9M 2005 9M 2006 Change 30.09.06 Change 4,399 3,106 -814 12,643 6,498 Sales Gross margin EBITDA EBIT Net financial expenses (euro)M Net income 1,556 31.12.05 +25% +32% -10% +17% +20% 5,479 4,109 -736 14,847 7,819 2,508 +61% 1.12x +0.171.29x Leverage
Slide 4: Strong growth across all businesses
Strong growth across all businesses RESULTS SUMMARY EBITDA: (euro)5,479M Latam Europe +25% +26% +27% +23% 54% 16% 30% EBIT: (euro)4,109M +32% Europe +35% 17% Latam +35% 32% +29% 51% Spain and Portugal Spain and Portugal 33Net income: (euro)2,508M +61% +43% 60% Europe +51% 17% Latam +119% 16% Other 7
Slide 5: Results exceed targets
Results exceed targets RESULTS SUMMARY EBITDA performance (euro)M 5,479 7,100 6,930 1,621 4T05 9M 06 Last 12 months 2006 target 44EBITDA in the last 12 months, above target for whole year 2006 ((euro)6,930M)
Slide 6: Efficiency Improvement Plan ahead of schedule
Efficiency Improvement Plan ahead of schedule RESULTS SUMMARY Increase in annual EBITDA due to Efficiency Improvement Plan (euro)M 300 670 181 189 370 Incremental growth 9M 06 o Europe: (euro)49M o Latin America: (euro)12M o Spain and Portugal: (euro)128M 2005 2006 Up to 2009 Total 2009 55Efficiency
Slide 7: Significant progress in Disposals Plan
Significant progress in Disposals Plan RESULTS SUMMARY Disposals of non-core assets (euro)M 105 763 280 378 5% Auna Real estate 49% NQF and Total assets others Exceeding 2006 targets: o Disposal of real estate assets in Palma de Mallorca completed: o Value: (euro)240M o Cash: (euro)213M o Endesa mai
Slide 8: Interim dividend in line with the strong growth of results
Interim dividend in line with the strong growth of results Interim dividend 2006 dividend commitment (1) (euro)/share 0.50 0.305 2005 2006 +64% o Dividend growth from ordinary activities: >12% o Dividend from disposals: >0,3 (euro)/share o Total dividend >1,6(euro)/share (1) Dividend policy to be ap
Slide 9: Spain and Portugal 9M06 results
Spain and Portugal 9M06 results
Slide 10: Spain and Portugal: Strong growth in results
SPAIN AND PORTUGAL Strong growth in results Sales Gross margin EBITDA EBIT Net financial expenses (euro)M 9M 2005 9M 2006 Change 2,380 1,634 -356 6,175 3,659 Net income 1,051 +23% +29% -9% +17% +19% 2,926 2,112 -324 7,235 4,339 +43%1,503
Slide 11: Spain and Portugal: Strong EBITDA growth
SPAIN AND PORTUGAL Strong EBITDA growth EBITDA (euro)M 2,926 Historical non- mainland deficit ((euro)227M) Generation + Supply Distribution 2,380 +23% 763 2,062 1,617 864 9M 05 9M 06 Highlights o Generation and Supply: Positive results o Competitive mix and portfolio optimization o Active management
Slide 12: Provisional impact of RDL 3/2006
Provisional impact of RDL 3/2006 SPAIN AND PORTUGAL January February (euro)M Deduction of the value of the assigned emission rights for the period -121 42,501 (1) Bilateral agreements with supplier Generation matched with distribution o 46% of distribution purchases o Provisional price: (euro)42.35/
Slide 13: Competitive mainland fuel costs
SPAIN AND PORTUGAL Competitive mainland fuel costs Endesa Rest of the sector (e) (euro)/MWh (euro)/MWh +8.7% 23.6 16.1816.16 21.7 +0.1% 9M05 9M06 9M05 9M06 o Good evolution of fuel cost, despite rise in market prices o Stronger competitive position in terms of both price and mix Note: Ordinary mainl
Slide 14: Competitive generation portfolio
SPAIN AND PORTUGAL Competitive generation portfolio Mainland data Generation mix Utilization rate of thermal vs. rest of the sector capacity (1) vs. rest of the sector 42% 33% 58% 67% Hydroelectric + Nuclear Thermal 61% 73% ENDESA Rest of the sector ENDESA Rest of the sector o Most competitive and e
Slide 15: Active management on CO2 emissions cost
SPAIN AND PORTUGAL Active management on CO2 emissions cost Key player in the CO2 Key player in developing CDM market projects ERPA contract signed projects LoI signed and closed price Projects under negotiation Volume (k tCO2) 71.9 MtCO2e 25.1 MtCO2e 104.1 MtCO2e CO2 Volume CO2 Price 35 400 30 350 3
Slide 16: Unlocking the value of the customer portfolio
SPAIN AND PORTUGAL Unlocking the value of the customer portfolio Generation revenue via sales to: Margin from other activities (1) Pool (bilateral with Deregulated market distribution) 59.79 ((euro)M) 88 (euro)/MWh 53.05 42.35 RDL 3/2006 Underlying DM Underlying sales 9M06 renewals Underlying -21 en
Slide 17: New installed capacity in 2006
New installed capacity in 2006 SPAIN AND PORTUGAL Progress in 9M06 MW 400 o Colon, already operational CCGTs o By year-end 2006, completion of: Renewables o 15 wind farms in Spain: 321 MW 158 o Gas turbines of CCGTs: Ca<180>s Tresorer, Barranco de Tirajana and Granadilla: 303 MW Non 424 mainland o D
Slide 18: Progress in Capacity Plan for 2007-2009
SPAIN AND PORTUGAL Progress in Capacity Plan for 2007-2009 Plan 2007-2009 MW 800 2,000 730 1,400 2,800 CCGTs Non- mainland Renew- ables o Puentes: 800 MW, 1Q07 o Connection point awarded (800 MW) in Tejo (50%50%) with International Power o CCGT: 478 MW o Diesel groups: 125 MW o Gas turbines: 127 MW
Slide 19: Distribution: operational improvements and quality of supply
SPAIN AND PORTUGAL Distribution: operational improvements and increase in quality of supply 9M06 EBITDA improvement, as a result of implemented investment plans o 72% of the Distribution EBITDA improvement, result of investments made o 56% due to efficiency improvements o Reduction of losses o Costs
Slide 20: Regulation: Positive developments and bright outlook
SPAIN AND PORTUGAL Regulation: Positive developments in 9M06 and bright outlook Regulatory developments in 9M06 o 2006 Effective tariff: +9.1% o NAP: Improvement over Strategic Plan's hypothesis o Non-mainland: Approval of methodology for recognising costs and investments Areas under development lea
Slide 21: Clearly achieving improved targets
SPAIN AND PORTUGAL Clearly achieving improved targets EBITDA 4,590 (euro)M +15% 3,750 3,266 +23% 2,926 2,380 First ninemonths 2005 2006 Target 2009 Target
Slide 22: Europe 9M06 results
Europe 9M06 results
Slide 23: Results underscore strength of European business
EUROPE Results underscore strength of European business 9M 2005 9M 2006 Change 702 515 -44 2,798 944 Sales Gross margin EBITDA EBIT Net financial expenses (euro)M 283Net income +27% +35% -14% +11% +20% 890 693 -38 3.113 1.137 +51%426 (1) (1) Includes (euro)118M from asset revaluation in 2006.
Slide 24: Europe: Strong EBITDA growth
EUROPE Strong EBITDA growth EBITDA 890 M(euro) Trading and Snet Endesa Italia other 702 +27% 561 739 147 136 5 4 9M 05 9M 06 Highlights o Italy: o Increased output and margins o Progress made on regasification projects and new capacity (CCGTs and renewables) o Significant progress in supply o France
Slide 25: Endesa Italia: Increased output and higher margins
EUROPE Endesa Italia: Increased output and higher margins Output and purchases (GWh) Breakdown of sales (GWh) 8,976 205,605 +8% 24,914 23,153 24,914 23,153 8,318 19 5,824 Purchases Supply and large customers 28% 25% 55%52% "Adquirente Unico" 20%20% Pool Wind CCGT Hydro Coal Fuel Gas 2,796 3,714 4,37
Slide 26: Italy: Progress in Capacity Plan
EUROPE Italy: Progress in Capacity Plan New capacity in 2006 Plan 2007-2009 MW CCGTs Renewables 400 400 289 o Construction of Scandale (Jul 08) 800 o Construction of Tavazzano 9 (2009) Committed wind farms: 216 MW o 1,089 MW of new capacity expected for 2007-09 o Acquisition of Teverola and300 Ferra
Slide 27: Italy: Advances at the Livorno regasification terminal
Italy: Advances at the Livorno regasification terminal EUROPE o Endesa stake: 25.5% o Joint control with towns of Genova and Livorno o 4 bcm/pa capacity (50% for Endesa) o All authorisations have been obtained o Contracts in place with potential gas suppliers o Due to come on stream: July 2008 Targe
Slide 28: Snet: Increased sales and margins
EUROPE Snet: Increased sales and margins Output and purchases (GWh) Breakdown of sales (GWh) +24% 13,888 11,161 13,888 44% 36% 15% 32% 31% 24% 10% 8% 11,161 7,081 7,023 6,865 4,080 Output Purchases EdF contract Forward & day ahead market Supply Poland Unitary margin: 20(euro)/MWh 9M05 9M 06 9M05 9M
Slide 29: France: Start up of Industrial Plan
EUROPE France: Start up of Industrial Plan French Market o Lack of semibase and peak capacity due to higher demand and GIC Directive o Existence of gas and access infrastructure o Growing forward prices of ~(euro)55 /MWh (base) and ~(euro)85 /MWh (peak) in 2007 o Organized wholesale markets o Price
Slide 30: France: Start up of Industrial Plan
France: Start up of Industrial Plan EUROPE Capacity Plan MW o All authorisations have been obtained o Emile Huchet 2x400 MW o Second authorised CCGT in France Jul-09 800 o Own site o Investment: (euro)400M CCGTs 400 o Lacq: 800 MW 2009+ 800 o Lucy/Hornaing: 400 MW Interconnections and sites Average
Slide 31: Trading: Increase in activity
EUROPE Trading: Increase in activity Trading EBITDA: (euro)26M +30% Additional contributions: -Endesa Italia: (euro)25M -Snet: (euro)8M o Supply platform o Access to interconnections o Energy management backed by physical assets (Bialystok, 330 MW) 144 GWh 304 GWh 1,249 GWh 509 GWh 1,224 GWh 100 GWh
Slide 32: Europe: Clearly achieving improved targets
EUROPE Clearly achieving improved targets EBITDA (euro)M 1,370 +24% 1,100 887 +27% 890 702 First nine months 2005 2006 Target 2009 Target
Slide 33: Latin America
9MO6 results a | = endesa — Latin America
Slide 34: Latin America: Strong growth in results
LATIN AMERICA Strong growth in results 9M 2005 9M 2006 Change(euro)M Sales Gross margin EBITDA EBIT Net financial expenses Net income excl. minorities Net income (1) 1,323 964 186 -362 3,670 1,893 +26% +35% +119% +3% +23% +24% 1,663 1,304 408 -374 4,499 2,343 471 +100%942 (1) Includes impact of (eur
Slide 35: Sustained and profitable organic growth
LATIN AMERICA Sustained and profitable organic growth EBITDA 1,663 Transmission -54 and other 1,323 +26% 613 902 815 702 (euro)M 8 Distribution Generation 9M05 9M06 Highlights o Operating growth in output 8.2% and sales 5.2% in all countries and stable exchange rates o Generation: Improved price and
Slide 36: Strong growth in output and sales
Strong growth in output and sales LATIN AMERICA Output (GWh) Sales (GWh) +8.2% +5.2% 46,364 42,870 9M069M05 +12% +8% +7% +8% +4%5,061 5,271 8,855 9,577 13,778 14,693 3,3793,130 12,046 13,444 43,175 41,033 Argentina 9M069M05 +5% +5% +4% +6% +7% 3,356 3,605 7,469 7,917 8,847 9,235 10,863 11,396 10,498
Slide 37: Improved generation price and mix mainly in Chile
LATIN AMERICA Improved generation price and mix mainly in Chile EBITDA Generation ((euro)M) Generation margin 902 2004-2009 (US$/MWh) +29% 96 Argentina 114 111 171 168 250 435 97 92 70 Brazil Strategic Plan CAGR +4.5% 702 +21.8% 25.1 Chile 20.6 Colombia Peru 9M05 9M 06 9M05 9M06 3636 o Output growth
Slide 38: High EBITDA growth in distribution, especially in Brazil
LATIN AMERICA High EBITDA growth in distribution, especially in Brazil EBITDA Distribution ((euro)M) Distribution margin (US$/MWh) +33% 815 35 Argentina Plan Strategic 2004-2009 CAGR +2.6% 613 139 202 41 +17.8% 160 344 Brazil 35.9 30.5 54 63 177 213 Chile Colombia Peru 9M05 9M06 9M05 9M06 3737 o Sal
Slide 39: Latin America: Progress in Capacity Plan
LATIN AMERICA Progress in Capacity Plan New Capacity in 2006 MW Gas 186 o Acquisition of Termo Cartagena (186 MW) Colombia o Etevensa (2x86MW) CCGT Peru 172 +358 MW in 2006 Plan 2007-2009 o 2007: 276 MW, Chile o Endesa Eco (renewables): 24 MW o Palmucho (hydro): 32 MW o San Isidro (CCGT): 220 MW (ga
Slide 40: Progress in Capacity Plan: The Aysen Project
Progress in Capacity Plan: The Aysen Project LATIN AMERICA Plant El Salto Baker 1 Pascua 2 Baker 2 Pascua 1 Total o Shareholders: o Endesa Chile:51% o Colbun: 49% o Investment (2): ~ USD2,100M Project o Timetable: o 2005-2006: Technical and environmental studies o 2005-2008: Permits and licenses o 2
Slide 41: Cash returns in line with Strategic Plan targets
Cash returns in line with the Strategic Plan targets LATIN AMERICA Total 308 125 433 o 43% of Strategic Plan's targets met (US$1,000M) o Underway, new capital reduction in Colombia for US$145M (approx. US$39M return cash flow to Endesa International) o In progress, collection of approx. US$ 26 M of
Slide 42: Latin America: Clearly achieving improved targets
LATIN AMERICA Clearly achieving improved targets EBITDA 2,370 (euro)M +11% 2,080 First nine months 1,878 1,663 +26% 1,323 2005 2006 Target 2009 Target
Slide 43: Financial analysis 9M06 results
Financial analysis 9M06 results
Slide 44: Positive cash flow in all businesses
FINANCIAL ANALYSIS Positive cash flow in all businesses Yoy change in + 12% +6% +19% Cash Flow 1,876 (euro)M Cash flow Capex Cash flow Capex Cash flow Capex 911 531 601 165 1,549 Spain and Portugal Europe Latin America
Slide 45: Evolution of debt
Evolutionofdebt FINANCIAL ANALYSIS By (euro)M 722 +15 % 18.281 3,318 Latam Europe Spain, Portugal and others 10,886 13,731 15,450 1,286 349 6,109 By business company 21,016 21,016 5,780 730 4,836 Enersis 16,809 E. Italia 3,385 2, 1,505 Spain, Portugal and rest Net debt excluding Net debt at Cash Inv
Slide 46: Recognised regulatory receivables of more than €4,200M
Recognised regulatory receivables of more than (euro)4,200 M FINANCIAL ANALYSIS (euro)M 1,281 22 4,207 1,194 1,710 (1) 2005 Mainland 9M06 Mainland Non-mainland CTCs Italy Total deficit (1) deficit deficit 2001-2006 o Transferred collection rights on 2005 Mainland Deficit o Payment expected by Novemb
Slide 47: Favourable debt structure in a context of rising interest rates
FINANCIAL ANALYSIS Favourable debt structure in a context of rising interest rates Debt structure o Debt structure: (euro)21,016M (euro)21,016M o Fixed-rate or hedged debt: 68% o Debt in currency in which cash flow is generated US$ 13% Chilean Peso 4% Other 6% o Average cost of debt: 5.49%: Floating
Slide 48: Conclusions
9MO6 results a on ae endesa — Conclusions
Slide 49: Conclusions: Clearly achieving improved targets (EBITDA)
CONCLUSIONS Clearly achieving improved targets EBITDA 8,330 (euro)M +15% 6,930 6,020 +25% First nine months 4,399 5,479 2005 2006 target 2009 target
Slide 50: Net Income: Clearly achieving improved targets
Net Income Clearly achieving improved targets 49499M 2005 9M 2006 M(euro) First nine months +61% 1,556 2,508 Full year 2005 Target 2006 Target 2009 Results from asset sales Results excluding asset sales 1,341 1,841 3,182 480 120 2,420 2,880 2,900 3,000
Slide 51: Conclusions: In sum, over the past year
CONCLUSIONS In sum, over the past year o Strategic Plan targets consistently exceeded o Active management of the businesses: growth and efficiency Endesa's o Future growth projects greater value already underway o Maximisation of shareholder value
Slide 52: Back-up
Back-up
Slide 53: Generation business in Spain and Portugal
Generation business in Spain and Portugal SPAIN AND PORTUGAL Endesa's mainland generation business (GWh) 57,303 59,376 -3.5% 1,770 881 5,605 1,569 Renewable/CHP 2,029 17,806 5,541 27,216 25,700 CCGT 5,641 Fuel-oil -6.9% Coal +1.9% Hydro Nuclear 16,835 6,085 9M05 9M06
Slide 54: Competitive mainland fuel costs
SPAIN AND PORTUGAL Competitive mainland fuel costs Breakdown of mainland unit fuel Breakdown of impact on fuel costs cost 9M05 9M06 % chg 28.0 33.2 18.6% 23.1 22,3 -3,5% 19.3 19,5 1.2% 51.2 81.0 58.3% 16.2 0.1%16.2 25.1 26.0 3.6% (euro)M +54 -89 (euro)/MWh 934 CCGT (1) 899 Increase in Domestic coal
Slide 55: Competitive mainland fuel costs
SPAIN AND PORTUGAL Competitive mainland fuel costs 27,5 25,5 23,5 21,5 19,5 17,5 15,5 13,5 11,5 9,5 7,5 Fuel costs -quarterly performance ((euro)/MWh) Rest of sector (e) (excl. Endesa) Iberdrola (e) Endesa 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 Endesa has the most competitive fuel co
Slide 56: Growth in renewables/CHP
Capacity (MW) (1) Output (GWh) (1) Growth in renewables/CHP SPAIN AND PORTUGAL 1402021,2301,4015465192382,119 +8% 2,298 4394384121,7012,0051,9281,8164044,481 4,664+4% Cogen Wind Mini Hydro 140 Other 9M05 9M06 9M05 9M06 Sales (M(euro)) EBIT (M(euro)) 195+29% 9M05 9M06 65+32% 9M05 9M06 (1) 100% of pro
Slide 57: SIEPAC: Central American Energy Integration
SIEPAC: Central American Energy Integration LATIN AMERICA Guatemala Honduras NicaraguaEl Salvador Costa Rica Panama 30 bays in 16 substations 48 optic fibre OPGW cable Country KMS. Guatemala 279 El Salvador 285 Nicaragua 310 Costa Rica 477 Panama 140 Total 1,867 Honduras 376 o Construction and maint
Slide 58: Advances in optimising ownership structure
LATIN AMERICA Advances in optimising ownership structure Etevensa -Edegel merger o Carried out in June 2006 Creation of Brazilian holding o Carried out October 2005 o IFC acquired stake (2.7%) in Endesa Brasil Chilectra -Elesur merger o Carried out in March 2006 Emgesa -Betania merger In progress o
Slide 59: Structure of the disposal of real estate assets in Palma de Mallorca
Structure of the disposal of the real estate assets in Palma de Mallorca Phase 1: Endesa receives (euro)240M Neinver 100% Neinver Bolonia S.L (euro)240 M Assets Endesa (Spain and Portugal) Loan 190 M(euro) Bank Neinver Fase 2: Endesa invests (euro)27M 55% o Urbanisation development o Sales to real e
Slide 60: Debt structure aligned with needs and business risk
FINANCIAL ANALYSIS Debt structure aligned with needs and business risk Currency hedging Interest rate hedging DebtCurrency (euro)M Interest rates Debt (euro)M 16,180 4,836 21,016 16,180 4,836 21.016 6% 4% 25% 13% 21% 100% 77% 54% Enersis Endesa excl. G. Enersis TOTAL Euro US$ Chilean peso Others Fix
Slide 61: Endesa debt maturities excluding Enersis
FINANCIAL ANALYSIS ENDESA debt maturities excluding Enersis Balance of debt maturities: (euro)16,629M (1) 8,279 4,308 3,971 (euro)M Bonds Bank credit Promissory notes (2) 2,476 2,304 1,122 1,234 1,110 866 1,976 328 1,214 110615 397 940 294 10 1,204 500 4Q06 2007 2008 2009 2010 2011 + ENDESA's liquid
Slide 62: Enersis debt maturities
FINANCIAL ANALYSIS Enersis debt maturities Balance of debt maturities: (euro)5,667M (1) 2,528 2,019 509 Bonds Bank credit (euro)M 940 562 725 265 669 271 481 240 431 328 460 103 191 290 322 4Q06 2007 2008 2009 2010 2011 + ENDESA's liquidity excluding Enersis is (euro)1,317M ((euro)825M in cash and (
Slide 63: Commitments to shareholders for the period
Commitments to shareholders for the period GUIDANCE Commitments 2006 EBITDA target (euro)6,930M 2006 net income target (euro)2,900M 2009 EBITDA target (euro)8,330M 2009 net income target (euro)3,000M Dividend from ordinary activities (05-09) ~(euro)7,600M Dividend from disposals (05-09) ~(euro)2,300
Slide 64: Important information
Important information Investors are urged to read Endesa's Solicitation/Recommendation Statement on Schedule 14D -9 when it is registered with the US Securities and Exchange Commission (the "SEC"), as it will contain important information. The Solicitation/Recommendation Statement and other public f
Slide 65: 9M 2006 results: Endesa's greater value
25 October, 2006 9M 2006 results Endesa's greater value