Enel SpA · MIL:ENEL
Enel SpA — FY2005 Earnings Presentation
60 slides from Enel SpA's earnings presentation, Mar 23, 2006
Slide 1: 2005 Results 2006-2010 Plan
2005 Results 2006-2010 Plan London, 23 March 2006 0
Slide 2: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 plan – Market Francesco Starace – Generation & Energy Management Sandro Fontecedro – Infrastructure & Network Livio Gallo – International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 1
Slide 3: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 plan – Market Francesco Starace – Generation & Energy Management Sandro Fontecedro – Infrastructure & Network Livio Gallo – International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 2
Slide 4: Operational data: Italian generation market
2005 Results Operational data: Italian generation market Generation & import (TWh) 2004 2005 % Total demand 325.4 329.4 1.3% (1) Total net production 290.0 289.7 -0.1% Enel net production 125.9 112.1 -10.9% Others net production 164.2 177.6 8.2% Total import 45.6 49.2 7.7% Source: Terna (1) Includin
Slide 5: Operational data: Italian electricity market demand
2005 Results Operational data: Italian electricity market demand Electricity sales(1) (TWh) 2004 2005 % Total market sales 304.5 308.4 1.3% Enel sales 157.8 148.2 -6.1% Others sales 146.7 160.2 9.2% Electricity distribution (TWh) 2004 2005 % Enel 250.7 251.0 0.2% (1) Net of losses on the grid 4
Slide 6: Operational data: Italian gas market
2005 Results Operational data: Italian gas market Gas sales(1) 2004 2005 % Total consumption (bcm) 50.8 52.3 3.0% Enel sales (bcm) 5.2 5.1 -1.9% Enel gas customers (thousands) 1,966 2,143 9.0% (1) Excluding thermal generation 5
Slide 7: Operational data: Enel's international activities
2005 Results Operational data: Enel’s international activities Generation 2004 2005 % Net installed capacity (MW) 3,693 3,786 2.5% Net production (GWh) 12,321 13,625 10.6% Distribution and sales 2004 2005 % Electricity sales (GWh) 4,459 8,093 81.5% Electricity distribution (GWh) 4,952 9,651 94.9% Cu
Slide 8: Financial highlights
2005 Results Financial highlights €mn 2004 2005 % (1) Revenues 31,011 34,059 9.8% (2) Ebitda 8,071 7,745 -4.0% Ebitda net of stranded costs 7,003 7,745 10.6% Group net income 2,631 3,895 48.0% (3) of which net ordinary income 1,862 2,742 47.3% Net debt 24,514 12,312 -49.8% Excellent financial perfor
Slide 9: EBITDA evolution (€mn)
2005 Results EBITDA(1) evolution (€mn) 207 98 7,745 438 7,003 304 Services & 206 Holding(2) 3,737 Network &(3) 3,530 Sales Generation & 3,705 3,267 Energy Mgmt(4) 2004 Generation & Network Services 2005 Energy Mgmt & Sales & Holding(2) Profitability steadily growing in all business areas (1) 2004 EB
Slide 10: Net debt evolution (€mn)
2005 Results Net debt evolution (€mn) Down 12.2bn 2004 Wind Cash flow Capex Extra- Net Taxes Dividends 2005 Terna from ordinary financial operations activities charges -863 -1,815 -3,257 +5,118 -3,472 -12,312 +8,065 -24,514 +8,426 Strong operational cash-flow and extraordinary items 9
Slide 11: Dividend (€c/share)
2005 Results Dividend (€c/share) +22% 44 36 Paid in 2005 2006 A sound and high-yield investment 10
Slide 12: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 plan – Market Francesco Starace – Generation & Energy Management Sandro Fontecedro – Infrastructure & Network Livio Gallo – International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 11
Slide 13: 2004-2010 free electricity market evolution (TWh)
Market 2004-2010 free electricity market evolution (TWh) 363 342 Key competition drivers 325 329 306 82 f Full market opening in 2007 Captive 226 152 130 f New power generation market 156 170 f Value-added services offered by retailers 237 Free f Launch of a structured Potential 169 market free forw
Slide 14: Domestic electricity market in 2005
Market Domestic electricity market in 2005 Electricity consumption(1) (TWh) Number of customers (mn) 287 34.6 Free Market 0.283 Free Market 135 Eligible 7.3 48% Market Eligible ~22% Market 90 Captive Market 27 52% Captive Market 62 Self consumption 21 Self consumption N/A 21 N/A Losses on the grid L
Slide 15: 2005-2010 domestic gas market evolution (bcm)
Market 2005-2010 domestic gas(1) market evolution (bcm) 52.3 52.6 54.2 1.8 Other uses 1.7 1.8 29.3 Residential 28.8 30.1 market Industrial 20.5 22.0 23.1 market Other 2 2 3 consumption 2005 2007 2010 High penetration of gas distribution in Italy (1) Excluding thermal generation. Totals do not includ
Slide 16: Enel's position in 2005
Market Enel’s position in 2005 Total market Enel Gas Electricity (free market) Electricity (captive market) 52.3 135 283 152 34.3 17.0 130 29.8 5.1 2.1 18 39 Volumes Customers Volumes Customers Volumes Customers (bmc) (mn) (TWh) (thousands) (TWh) (mn) f Enel is the 2nd operator in f Enel is the 1st
Slide 17: Enel's targets in 2010
Market Enel’s targets in 2010 Gas (bcm) Electricity free market (TWh) Electricity captive market (TWh) Expected market share: 14% Expected market share: 34% Expected market share: 81% retail & large 130 7.5 energy intensive 81 108 64 5.8 66 5.1 30 18 17 8 10 13 15 2005 2007 2010 2005 2007 2010 2005
Slide 18: Enel's domestic targets in 2010: electricity free market (TWh)
Market Enel’s domestic targets in 2010: electricity free market (TWh) 81 19 Residential retail & large energy intensive Micro & medium 41 30 businesses 18 17 Large businesses 6 8 13 15 Energy intensive 10 2005 2007 2010 Strong penetration in SME and residential segments Targeting 12mn customers 17
Slide 19: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 plan – Market Francesco Starace – Generation & Energy Management Sandro Fontecedro – Infrastructure & Network Livio Gallo – International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 18
Slide 20: Fuel price scenario
Generation & Energy Management Fuel price scenario Brent ($/bbl) 62 45 57 4Q2005 Jan-Feb Long-term 2006 (2010) Coal(1) ($/ton) 58 50 52 4Q2005 Jan-Feb Long-term 2006 (2010) (1) CIF ARA (Rotterdam) 19
Slide 21: Market scenario
Generation & Energy Management Market scenario Additional capacity(1) Additional capacity(1) CCGT Greenfield (GW) CCGT Repowered (GW) Operating 4.8 Operating 3.8 5.7 9.5 Under Under 7.1 construction 0.8 1.6 2.4 construction Already Construction Enel authorised 8.1 about 0.4 Others (on hold) to start
Slide 22: Market scenario
Generation & Energy Management Market scenario Continental power price vs IPEX (€/MWh) 68 IPEX 66 44 Price convergence 25 Average Powernext, EEX April September February July December 2004 2004 2005 2005 2005 f Spread between Italian and continental price is decreasing f Less than expected increase
Slide 23: CO2 Emission Trading Scheme
Generation & Energy Management CO2 Emission Trading Scheme CO2 Effects on variable costs(1) (€/MWh) Fuel cost CO2 = 20€/ton 64 57 CO2 = 40€/ton 51 14 35 7 31 15 50 50 20 20 Coal CCGT Coal CCGT Actions undertaken to develop competitive CO2 sourcing f Carbon funds: participation in ICECAP already fina
Slide 24: Re-powering plan
Generation & Energy Management Re-powering plan Enel’s Production Mix c1% Oil & Gas ST/OCGT 26% 20% 29% Gas CCGT 45% 19% 20% 50% Coal 9% 27% 25% 22% 24% 27% 27% 30% Renewables 2002 2004 2005 Target Highly efficient CCGTs Coal re-powering f 10 in operation f Torre Nord under construction f 2 under
Slide 25: Operational efficiency
Generation & Energy Management Operational efficiency O&M/MW thermal (k€) 13.9 11.4 10.6 10.2 2002 2004 2005 2007 Actual Actual Actual Target Total Quasar project coal Thermal: Quasar project plants plants availability (%) imbalanced production (%) 89.8 86.8 Quasar project to 6.4 yield 50€mn per yea
Slide 26: Growth in renewables - Italy
Generation & Energy Management Growth in renewables - Italy Investments (€bn) 112MW additional renewable capacity in 2005 1.3 Wind 0.8 Hydro Geothermal 2003-2005 2006-2010 Pursuing growth in renewables with 300 MW of additional capacity in 2006-2010 25
Slide 27: Strategy
Generation & Energy Management Strategy Conversion Plan f Coal conversion program on track Torre Nord: plant operational by 2008 Porto Tolle: plant operational by 2010 Operational efficiency f Continuous improvement thanks to a total quality approach 50€mn per year of economic benefits startin
Slide 28: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 plan – Market Francesco Starace – Generation & Energy Management Sandro Fontecedro – Infrastructure & Network Livio Gallo – International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 27
Slide 29: Evolution of electricity and gas
Infrastructure & Network Evolution of electricity and gas Electricity distributed (TWh) Gas distributed (bcm) Current market share: 81% Current market share: 8% 274 4.6 3.7 3.9 4.1 258 251 251 2004 2005 2007 2010 2004 2005 2007 2010 2005-2010 CAGR 1.9% 2005-2010 CAGR 2.9% 31 million end-users 2.5 mi
Slide 30: Results delivered: electricity
Infrastructure & Network Results delivered: electricity Efficiency - Cash cost (€/customer) Quality - Minutes lost per customer Opex -50% Capex (1) 153 128 125 119 73 64 103 89 84 50 36 35 2001 2004 2005 2001(2) 2004(2) 2005(2) 1,000€mn savings(3) 2002-2005 cumulated per year quality bonus >450€mn (
Slide 31: Results delivered: gas
Infrastructure & Network Results delivered: gas 6.0 2,200 Bcm 5.5 2,000 End-users 5.0 1,800 4.5 1,600 customers Thousand 4.0 1,400 Bcm 3.5 1,200 3.0 1,000 2.5 800 2.0 1.5 600 1.0 400 0.5 200 0.0 0 2000 2001 2002 2005 Second largest operator in Italy with 2 million end-users 30
Slide 32: Automatic Meter Management
Infrastructure & Network Automatic Meter Management Remote readings (mn) Remote operations (mn) 142 6.1 96 3.5 30mn units installed by end 2006 13 0.9 2004 2005 2006 2004 2005 2006 f Improved accuracy and efficiency f Reduction in call-outs f Fraud reduction f Bad-debt management Significant improve
Slide 33: Continuous process re-engineering
Infrastructure & Network Continuous process re-engineering Palm-top to field units Work force management Network automation f On-line maintenance f Real-time localization of f HV and MV network schedule vehicles remotely operated f Continuous access to the f Optimization of field f Automatic fault c
Slide 34: Risk-based asset management
Infrastructure & Network Risk-based asset management Efficiency – Capex(1) per customer (€) Quality - Investments and service level Minutes lost 64 Investments (€mn) 56 47 Enel 35 990 973 931 UK comparables 73 Spain 47 comparables 2005 2007 2010 Investments based on ‘scale of risk’ of network assets
Slide 35: Cash-cost per customer of electricity distribution
Infrastructure & Network Cash-cost per customer of electricity distribution Euros per customer Opex Capex (1) 1,000€mn 119 113 Additional savings per year 107 360€mn savings per year 84 79 76 35 34 31 2005 2007 2010 1,360€mn of savings per year by 2010(2) (1) Exluding AMM project (2) Vs 2001 34
Slide 36: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 plan – Market Francesco Starace – Generation & Energy Management Sandro Fontecedro – Infrastructure & Network Livio Gallo – International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 35
Slide 37: European regional markets: Enel's position
International activities European regional markets: Enel’s position Northern Pool Iberia Central EU + Centrel + Italy Southern-Eastern EU Becoming a leader in the European market 36
Slide 38: Iberia: Spain
International activities Iberia: Spain Current market scenario f Demand growing 4% per year f Pool price almost doubled in 2005 Enel’s current position Development of Enel’s position f Installed capacity: 2,600MW (of f Installed capacity: 1,625€mn which 1,000MW in renewables) investments to upgrade
Slide 39: Southern-Eastern Europe: Romania
International activities Southern-Eastern Europe: Romania Current market scenario f EU membership in 2007 f Full liberalisation of non-residential market starting from 2006 f High return on investment f GDP growing 4-5% per year Enel’s current position Development of Enel’s position f Electricity so
Slide 40: Centrel: Slovakia
International activities Centrel: Slovakia Current market scenario f High interconnection capacity f Few new plants expected to be built in the region f Wholesale market price converging to German level Enel’s current position Development of Enel’s position f Installed capacity: 6,400MW f 80€mn inve
Slide 41: Northern and Latin America
International activities Northern and Latin America Current market scenario f Favourable regulatory framework for renewables f Opportunities to grow in geothermal in Latin America Enel’s current position Development of Enel’s position f Installed capacity: 600MW (completely in f Consolidation of por
Slide 42: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 plan − Market Francesco Starace − Generation & Energy Management Sandro Fontecedro − Infrastructure & Network Livio Gallo − International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 41
Slide 43: Strategy: three clear priorities
Strategy and targets Strategy: three clear priorities f Retain our market leadership in Italy in a liberalising market f Improve customer value through continued investment program and cost leadership f Continue to invest in and grow our European energy and International renewables activities, organ
Slide 44: Overall financial targets
Strategy and targets Overall financial targets f Annual OPEX reduction 2005-2007(1) >Euro200mn f EBITDA CAGR 2005-2007 ≥3% f EBITDA - International 2007 (% of total) > 10% f ROACE (2007) 17% Further growth will come from new international acquisitions (1) It does not consider any change in the scope
Slide 45: Strategic considerations
Strategy and targets Strategic considerations f Enel has already an established European footprint f European market is consolidating − High capex requirements − Long term investment cycle − Effective counter-balance to global energy companies − Scale delivers more value to consumers f Enel is a wel
Slide 46: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 Plan − Market Francesco Starace − Generation & Energy Management Sandro Fontecedro − Infrastructure & Network Livio Gallo − International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 45
Slide 47: Agenda
Agenda f 2005 Results Luigi Ferraris f 2006-2010 Plan − Market Francesco Starace − Generation & Energy Management Sandro Fontecedro − Infrastructure & Network Livio Gallo − International Activities Fulvio Conti f Strategy and Targets Fulvio Conti f Questions & Answers f Annexes 46
Slide 48: Income statement
Annexes Income statement (€mn) 2004 2005 % Operating revenues 31,011 34,059 9.8% Operating costs 22,940 26,314 14.7% (1) EBITDA 8,071 7,745 -4.0% % of revenues 26% 23% EBIT 5,870 5,538 -5.7% % of revenues 19% 16% (1) 2004 EBITDA includes Euro 1,068mn for past stranded costs 47
Slide 49: From EBIT to EPS
Annexes From EBIT to EPS (€mn) 2004 2005 % EBIT 5,870 5,538 -5.7% Net financial charges -852 -744 -12.7% EBT 5,018 4,794 -4.5% Net income continuing operations 2,902 2,860 -1.4% Net income discontinued operations -155 1,272 Net income (including third parties) 2,747 4,132 50.4% Group net income 2,63
Slide 50: Balance sheet
Annexes Balance sheet (€mn) 2004 2005 % Net financial debt 24,514 12,312 -49.8% Shareholders' equity 19,066 19,416 1.8% Net capital employed 43,580 31,728 -27.2% (1) ROACE = EBIT/Average Net Capital Employed. EBIT does not include 1,068€mn for past stranded costs 49
Slide 51: EBIT by business area (€mn)
Annexes EBIT by business area (€mn) -332mn -5.7% 5,870 5,538 Services & 646 195 -69.8% Holding 2,778 Network & 2,693 +3.2% Sales Generation & 2,531 2,565 +1.3% Energy Management 2004 2005 50
Slide 52: Generation & Energy Management
Annexes Generation & Energy Management (€mn) 2004 2005 % (1) Revenues 13,028 14,215 9.1% Italy 12,446 13,376 7.5% International 622 914 46.9% EBITDA 3,780 3,705 -2.0% Italy 3,565 3,415 -4.2% International 215 290 34.9% EBIT 2,531 2,565 1.3% Italy 2,435 2,403 -1.3% International 96 162 68.8% Capex 85
Slide 53: Network & Sales
Annexes Network & Sales (€mn) 2004 2005 % (1) Revenues 19,254 20,422 6.1% Power 17,865 18,818 5.3% Italy 17,474 17,905 2.5% International 391 913 133.5% Gas 1,396 1,602 14.8% EBITDA 3,530 3,737 5.9% Power 3,305 3,495 5.7% Italy 3,228 3,303 2.3% International 77 192 149.4% Gas 225 242 7.6% (1) Total
Slide 54: Network & Sales - Continued
Annexes Network & Sales - Continued (€mn) 2004 2005 % EBIT 2,693 2,778 3.2% Power 2,551 2,630 3.1% Italy 2,505 2,487 -0.7% International 46 143 210.9% Gas 142 148 4.2% Capex 1,711 1,692 -1.1% Net capital employed 12,334 13,421 8.8% Headcount 35,537 35,783 0.7% 53
Slide 55: Services & Holding
Annexes Services & Holding (€mn) 2004 2005 % Revenues 3,443 2,763 -19.8% Holding 1,649 1,103 -33.1% Services and other 1,794 1,660 -7.5% EBITDA 866 316 -63.5% Holding 652 67 -89.7% Services and other 214 249 16.4% EBIT 753 207 -72.5% Holding 647 53 -91.8% Services and other 106 154 45.3% 54
Slide 56: Services & Holding - Continued
Annexes Services & Holding - Continued (€mn) 2004 2005 % Capex 122 110 -9,8% Holding 10 11 10,0% Services and other 112 99 -11,7% (1) Net capital employed 885 639 -27,8% Headcount 4.416 6.091 37,9% Holding 590 569 -3,6% Services and other 3.826 5.522 44,3% (1) Services and other only 55
Slide 57: Capex by business area: continuing operations (€mn)
Annexes Capex by business area: continuing operations (€mn) +139mn +5.2% 2,829 2,690 Services & 110 122 -9.6% Holding Network & 1,692 -1.1% Sales 1,711 Generation & Energy Management 857 1,027 +19.9% 2004 2005 56
Slide 58: Debt structure
Annexes Debt structure f Average debt maturity: 7 years and 7 months f Average cost of debt: 4.3% f (Fixed+hedged)/Total long-term debt: 84% f (Fixed+hedged)/Total net debt: 81% f Rating: − S&P’s = A+/A-1 negative; Moody’s = Aa3/P-1 stable (€mn) 2004(1) 2005 % Long-term 18,696 10,904 -41.7% (2) Shor
Slide 59: Disclaimer
DISCLAIMER THESE SLIDES HAVE BEEN PREPARED BY THE COMPANY SOLELY FOR THE USE AT THE ANALYST CONFERENCE CALL ON ENEL’S FULL YEAR 2005 CONSOLIDATED RESULTS AND 2006-2010 PLAN. THE INFORMATION CONTAINED HEREIN HAS NOT BEEN INDEPENDENTLY VERIFIED. NONE OF THE COMPANY OR REPRESENTATIVES SHALL HAVE ANY LI
Slide 60: Contact us
Contact us Investor Relations Team: Luca Torchia: +39 06 8305 3437 Massimiliano Bevignani: +39 8305 7023 Donatella Izzo: +39 06 83057449 Fausto Sblandi: +39 06 83052226 Federica Todaro: +39 06 8305 9502 investor.relations@enel.it Visit our website at: www.enel.it (Investor Relations) 59