Endesa S.a. · BME:ELE
Endesa — FY2006 Earnings Presentation
48 slides from Endesa's earnings presentation, Jan 24, 2007
Slide 1: Endesa's greater value: Preliminary 2006 results and 2009 targets
January 24, 2007 Endesa's greater value Preliminary 2006 results and 2009 targets
Slide 2: Introductory note
Introductory note o Over the past few months Endesa has regularly updated its earnings guidance along with its quarterly earnings presentations o On this occasion, in light of the expected restart of the takeover process, it is particularly important for the market to have the company's most updated
Slide 3: Preliminary 2006 results and 2009 targets: Excellent preliminary results for FY2006
Preliminary 2006 results and 2009 targets Excellent preliminary results for FY2006 22 Strong growth expected for all business lines in 2007 Higher EBITDA and Net Income targets for 2009 Commitments to future growth Strong growth in all business lines Significant progress in the divestiture plan Sust
Slide 4: Strong EBITDA growth in 2006
Strong EBITDA growth in 2006 PRELIMINARY RESULTS EBITDA +19% 7,140 Preliminary* 6,930 Strong growth in all (euro)M business lines Announced target 6,020 o Improved margins and volume growth o Regulatory progress o Efficiency plan ahead of schedule o Macroeconomic stability in Latin America 2005 Prel
Slide 5: Net Income exceeds announced targets
Net Income exceeds announced targets PRELIMINARY RESULTS (euro)M Net income 3,182 2,950 Preliminary* Announced o Preliminary Net target o Strong operating 1,841 2,557 2,900 Income above target, Capital gains +39% despite negative accounting impact of tax rate reduction in Spain** from disposals Ordi
Slide 6: Spain and Portugal: Strong growth, above targets
Spain and Portugal: Strong growth, above targets SPAIN AND PORTUGAL EBITDA** (euro)M +17% 3,834 Preliminary * Announced 3,750 Target 3,266 2005 Preliminary 2006* Highlights Provisional impact of RDL 3/2006 Leading position and margin improvement in the retail business Operating improvements and high
Slide 7: Europe: Strong growth, above targets
Europe: Strong growth, above targets EUROPE EBITDA** (euro)M 1,117 Preliminary * +26% Announced Target 887 1,100 2005 Preliminary 2006* Highlights Italy Improved mix through new CCGTs Increased output and margins Achievement of Efficiency Plan France Diversification of customer portfolio Reduction i
Slide 8: Latin America: Strong growth, above targets
Latin America: Strong growth, above targets LATIN AMERICA EBITDA** (euro)M 2,189 Preliminary * +17% Announced Target Preliminary 2006* 1,878 2005 2,080 Highlights Stable average exchange rate and macroeconomic environment Strong growth in demand in all countries Progress in Capacity Plan Better unit
Slide 9: Favorable debt evolution
Favorable debt evolution DEBT AND DIVESTMENTS Evolution of net financial debt 19.8 Regulatory (euro)bn 18.3 2.8* receivables pending to collect 17.0 31/12/05 31/12/06* Non-recurring items: o Increase of regulatory assets* 0.5 o 2006 dividend payment of capital gains generated in 2005 1.3 Total 1.8 *
Slide 10: Delivery in 2006 clearly beyond targets
Delivery in 2006 clearly beyond targets COMMITMENTS Target Preliminary Achieved July 2006 FY 2006* EBITDA 2006 (euro)6,930M (euro)7,140M o Net Income 2006** (euro)2,900M (euro)2,950M o DPS 2006 *** >(euro)1.6/sh. >(euro)1.6/sh. o Leverage <1.4x 1.2x o Sustained performance clearly above 2005 and 200
Slide 11: Commitments to future growth
Commitments to future growth Strong growth in all business lines Significant progress in the divestiture plan Sustained performance clearly above targets Excellent preliminary results for FY2006 Preliminary 2006 results and 2009 targets o Strong growth expected for all business lines in 2007 o Highe
Slide 12: Committed to higher future results
Committed to higher future results EBITDA COMMITMENT EBITDA CAGR 2006-09** 8% New (euro)M 8,500 target 7,140 Previous target 6,930 8,330 Drivers Optimise current businesses Develop portfolio opportunities Benefit from deregulation Set basis for longer-term growth (>2009) Preliminary Target 2006* 200
Slide 13: Sustained growth during the period
Sustained growth during the period EBITDA COMMITMENT EBITDA CAGR 2006-2009: 8,500 8,330 8%** (euro)M 7,960 6,930 7,140 +9%** 7,440 Preliminary 2006* Target 2007 Target 2008 Target 2009 Bright outlook in 2007 *Preliminary 2006 estimates incorporate the same accounting criteria used throughout the yea
Slide 14: Updated 2007-09 investment plan sets basis for long-term growth
Updated 2007-09 investment plan sets basis for long-term growth INVESTMENT PLAN Investment Plan: 07-09 (euro)bn 12.3 12.3 Priorities Other 0.2 Latin America 44% 56% o Maintain leadership position in Spain and Expansion Latin America, Europe especially Chile o Grow in Europe, increasing capacity and
Slide 15: Basis for long-term growth
Basis for long-term growth INVESTMENT PLAN Evolution of total installed capacity GW 55.5 +15% 48.4 2006 Target 2009 Investments in 07-09 with start up after 2009 o Spain: (euro)1,265 M in CCGTs, wind, non-mainland o Italy: (euro)235 M in CCGTs o France: (euro)430 M in CCGTs o Latin America: (euro)75
Slide 16: Growing the renewables business and leadership in global CO2 management
RENEWABLES Growing the renewables business and leadership in global CO2 management Evolution of renewable installed capacity* GW 2.9 o Creation of General Directorate for Renewable Energies +79% o Leader in co-combustion and biomass o Development of renewable energy portfolio in Latin America o Deve
Slide 17: Spain and Portugal: sustained growth in an attractive market
Spain and Portugal: sustained growth in an attractive market SPAIN AND PORTUGAL EBITDA: 2006-2009 (euro)M 4,630 444 3,834 161 Historical non- mainland deficit ((euro)227M) 3,607 418 Preliminary Increase in Improved Regulatory Target 2006* activity operating changes 2009 efficiency * Preliminary 2006
Slide 18: Increase in activity based on growth in demand and installed capacity
Increase in activity based on growth in demand and installed capacity SPAIN AND PORTUGAL New capacity 2007-09 Mainland generation mix in MW 2009(e) Total=21,800 MW CCGTs +3,200 MW* Renewables Non-mainland +850MW Renewables +840 MW CCGTs Total new +4,890 MW capacity Total capacity 26,900 MW Coal by 2
Slide 19: Efficiency Plan ahead of schedule
SPAIN AND PORTUGAL Efficiency Plan ahead of schedule Increase in annual EBITDA due to Efficiency Improvement Plan 161 400 (euro)M 116 123 239 2005 2006 2007-2009 Target 2009 60% of the Plan's targets has already been achieved
Slide 20: Favourable regulatory framework
SPAIN AND PORTUGAL Favourable regulatory framework January 2007 Expected developments Tariffs o Energy at expected market prices o Quarterly tariff update o Ex-ante tariff deficit recognition o Full deregulation by 2009/2011 o Access tariff reduced, move towards liberalization o Elimination of 42.35
Slide 21: Europe: a growth platform
Europe: a growth platform EUROPE EBITDA: 2006-2009 (euro)M 110 1,117 Historical regulatory items ((euro)86M) 159 1,031 100 1,400 Preliminary Italy France New Target 2006* Markets 2009 * Preliminary 2006 estimate
Slide 22: Italy: Exceptional position in an attractive market
EUROPE Italy: Exceptional position in an attractive market o Mix improvement up to 2009: Generation mix expected by 2009 800 MW of new CCGTs (MW) Total=7,700 MW o Access to more competitive gas: Livorno regasification plant: 2 bcm Fuel-gas GALSI (Cerdena pipeline) o Self supply of green certificates
Slide 23: France: Development of Business plan
EUROPE France: Development of Business plan New capacity 2007-09 Gross margin MW CCGTs +800 MW 68% 44% 32% 56% Energy in deregulated market Renewables +150 MW EdF contract Total +950 MW Additional entry +800 MW of CCGTs in 2010 Preliminary 2006 2009 e Optimising energy management and on-going effici
Slide 24: Latin America: strong contribution to results, cash flow and value
Latin America: strong contribution to results, cash flow and value LATIN AMERICA EBITDA: 2006-2009 (euro)M 50 (251) 2,189 482 2,470 Preliminary Increased Improved Forecast Target 2006* activity and margins operating efficiency exchange rate 2009 * Preliminary FY2006 estimate.
Slide 25: Growth and operating improvement in Latin America
LATIN AMERICA Growth and operating improvement in Latin America New capacity 2007-09 MW CCGTs +515 MW Coal +220 MW Hydro +40 MW Renewables +50 MW Total new capacity +825 MW -Chile 574 MW -Other 251 MW Projects with start up after 2009 o Aysen*: 57% of 2,400 MW o Other hydro in Chile: 640 MW o Therma
Slide 26: Expected increase in cashflow from Latin America
Expected increase in cashflow from Latin America LATIN AMERICA Cash flow committed to Endesa (US$M) 1,000 1,600 Target Total Additional 2007-09 2005-09 possibilities 2005 + 2006 1,040 560 o Cash flow target for 2005-09 raised from US$1,000M to US$1,600M o Scope for additional cash return of US$ 1,00
Slide 27: Significant unrealised capital gains in Latin America
Significant unrealised capital gains in Latin America LATIN AMERICA (euro)M 6,200 Other stakes 4,800 900 500 3,800 Enersis 2,900 900 Market value* Book value 31-Dec-06 31-Dec-06 (e) * Market value of Enersis stake + book value for rest of portfolio (plus an estimated (euro)500M of additional market
Slide 28: Increased value of non-core assets
Increased value of non-core assets NON CORE ASSETS Real estate assets: Valuation Total non-core assets: Expected divestments 2007-09 (euro)M (euro)M Valuation as >650 Divestments of Nov 06* >1,500 Valuation as of Oct 05 610 Sold in 240 610 ~500 Capital gains after taxes 2H06 Valuatio140n as of Oct 0
Slide 29: Net Income growth commitment
Net Income growth commitment NET INCOME COMMITMENT Net Income (euro)M 3,0752,950 CAGR 2006-09 5% Capital gains from divestments 2,900 2,557 3,000 2,970 o Strong growth in Net Income from ordinary activities o Net Income from ordinary Ordinary activities of c.(euro)3,000M by income 2009 Preliminary T
Slide 30: Financial flexibility compatible with a strong shareholder remuneration
Financial flexibility compatible with a strong shareholder remuneration FINANCIAL FLEXIBILITY Dividend commitment: 05-09 ** Financial flexibility (euro)M 9,900 Debt/EBITDA: 2.8x 2.7x Dividends 2.6x 3,070 paid* 2.4x 6,830 Leverage (D/Equity): 1.2x 1.2x 1.2x 1.1x Preliminary 2007 E 2008 E 2009 E 2006
Slide 31: A global company with a unique asset base (i)
CONCLUSIONS A global company with a unique asset base (i) Presence in 12 countries Installed capacity: 56 GW Output: 229 TWh Sales: 251 TWh 26 Million customers 17 bcm of gas Note: 2009 targets
Slide 32: A global company with a unique asset base (ii)
A global company with a unique asset base (ii) CONCLUSIONS o Leader throughout the value chain in Spain and Latin America o A privileged position in other European markets: Italy, France and Portugal o Strategic position in Southern Europe to access gas markets o Leader in sustainability: CO2 manage
Slide 33: Conclusions: Endesa's greater value
Conclusions Endesa's greater value Consistently exceeding targets Excellent preliminary results for FY2006 Higher EBITDA and Net Income targets for 2009 Investment plan to ensure growth Unique business portfolio operating in very attractive markets An experienced and committed team CONCLUSIONS
Slide 34: Appendix
= By =” endesa — Appendix
Slide 35: Assumptions for preliminary FY2006 estimate results
Assumptions for preliminary FY2006 estimate results Preliminary FY2006 estimates incorporate the same regulatory assumptions considered throughout the year: o The price cap established by RDL 3/2006 remains at (euro)42.35/MWh o Reduction of the January and February tariff deficits by the amount of e
Slide 36: Macroeconomic assumptions
Macroeconomic assumptions 2006 Year-end Average 1.32 1.26 532.4 530.9 3.06 3.10 2.14 2.18 2,239 2,363 3.20 3.27 4.13% -5.04% - 60.1 65.4 Exchange rate: (euro)/$ Ch: Pesos/$ Arg: Pesos/$ Bra: Real /$ Col: Pesos/$ Peru: Sol /$ Interest rate: Euribor IRS 5Y LIBOR IRS 5Y Brent ($/Barrel) 2009E Average 1
Slide 37: Spain and Portugal: EBITDA growth 2006-2009 (i)
gulatory Spain and Portugal: EBITDA growth 2006-2009 (i) Increase EBITDA growthin activity in generation See and margins and supply: next +(euro)418M +(euro)376M page Improved operating efficiency +(euro)161M Cost improvement: EBITDA +(euro)138M growth Revenue growth: 06-09: +(euro)79M Increase in +
Slide 38: Spain and Portugal: EBITDA growth 2006-2009 (ii)
Spain and Portugal: EBITDA growth 2006-2009 (ii) Higher gross margins in ordinary mainland generation & supply Ordinary mainland +(euro)236M regime + supply: +(euro)45M Higher O&M costs -(euro)191M Increased activity and generation and Higher output: supply margin: Ordinary +(euro)135M +(euro)376M n
Slide 39: Spain and Portugal: Main assumptions
Spain and Portugal: Main assumptions Activity growth assumptions o Increase in output in ordinary mainland regime of only 11,000 GWh with 3,200 MW of new capacity installed: 2,100 GWh increase in hydro output output (2006 was a very dry year) 1,500 GWh increase in nuclear output (lack of availabilit
Slide 40: Spain and Portugal: Change in gross margins in generation and supply
Spain and Portugal: Change in gross margins in generation and supply 2006 Output, fuel costs and CO2 Unit gross margin: (euro)36.9/MWh -Avg. revenues: (euro)56.9/MWh -Variable cost: -(euro)18.0/MWh -Supply cost: -(euro)2.0/MWh Output: 71,870 GWh Gross margin: (euro)2,650M Gross margin Output Cost fu
Slide 41: Spain and Portugal: Regulatory assumptions
Spain and Portugal: Regulatory assumptions EBITDA 2009 vs. 2006 ((euro) M) Distribution Substitution of the framework in force until 2006 with a new remuneration and performance system based on compensating for investment in network expansion +300 Wholesale Market prices market New NAP 2008-12 +239
Slide 42: Annual investment plan: 07-09
Annual investment plan: 07-09 (euro)M 4,670 Spain and Portugal Europe Latin America Other 2,630 2,230 1,895 660 1,600 675 900 785 815 50 55 55 4,240 3,440 2007e 2008e 2009e
Slide 43: Annual investment plan: 07-09
Annual investment plan: 07-09 (euro)bn 2007E Spain and Portugal 2.6 2008E 2.2 2009E 1.9 2007-09 6.7 Expansion 1.2 1.1 0.9 3.2 Maintenance 1.4 1.1 1.0 3.5 Europe 0.7 1.6 0.6 2.9 Expansion 0.5 1.5 0.5 2.5 Maintenance 0.2 0.1 0.1 0.4 Latin America 0.9 0.8 0.8 2.5 Expansion 0.4 0.3 0.3 1.0 Maintenance 0
Slide 44: Breakdown of EBITDA growth by business line: 2006-09
Breakdown of EBITDA growth by business line: 2006-09 EBITDA (euro)M 8,5007,960 7,4407,140 Europe Latin America Spain and Portugal 2,189 2,280 2,360 2,470 1,117 1,150 1,400 1,280 3,834 4,630 4,320 4,010 2006E 2007E 2008E 2009E * Like-for-like growth (recurrent and with no changes in exchange rates)
Slide 45: New commitments: Net Income growth
NEW COMMITMENTS Net Income growth Net income 2,900 2,620 2,830 Net Income from ordinary activities Capital gains from asset disposals (euro)M 3,000 3,075 2,557 2,970 2,470 2,720 2,950 2006E 2007E 2008E 2009E * Preliminary FY2006 estimates incorporate the same regulatory assumptions considered throug
Slide 46: Main forecast magnitudes in 2009
Main forecast magnitudes in 2009 Total capacity (GW) Output (TWh) Sales (TWh) Customers (millions) Gas consumption (Bcm) 2009E Spain and Portugal Europe 26.9 13.5 109 50 117 65 13.2 -- 7.6 4.5 Latin America 15.1 70 69 13.0 4.5
Slide 47: 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 ("SEC"), as it will contain important information. The Solicitation/Recommendation Statement and other public fil
Slide 48: Endesa's greater value: Preliminary 2006 results and 2009 targets
January 24, 2007 Endesa's greater value Preliminary 2006 results and 2009 targets 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 authorized. ENDESA, S.A. Dated: J