Endesa’s net income up 30% thanks to increased margins and cost control

Published on Thursday, 23 February 2017

Endesa CEO José Bogas said: “We are very pleased about the excellent results recorded in 2016, a year that saw a significant drop in average wholesale electricity market prices. These results are due mainly to the sound management of the liberalised market, the stability of the regulated market and the progress we have made via a range of cost efficiency plans the company has applied across all of its businesses in recent years. In this regard, Endesa’s digitisation plan will continue to be essential to the development of efficiency plans. The additional purchase of 60% of EGPE during the financial year also provides Endesa with a solid growth platform."

  2016 2015 VARIATION % Variation (%) without extraordinary items (1) 
Million of euros        
REVENUES  18,979 20,299  - 7  
EBITDA  3,432 3,099 13 11
EBIT  1,965 1,598 23 21
NET INCOME 1,411 1,086 30 27
OPERATING CASH FLOW  2,995 2,656 13  
NET FINANCIAL DEBT 4,938 4,323 14  
NET INVESTMENTS 934 786 19  

(1) Net of 2015 CO2 swap transaction, EGPE contribution and workforce restructuring provision in 2015 and 2016.

• 2016 EBITDA and net income have exceeded Endesa’s commitments set forth within the 2016-2019 strategic plan.

• Endesa’s gross margin was 5,652 million euros in 2016, a 3.1% increase due mainly to the solidity of the company’s margin in the liberalised market.

• In order to analyse the progress of Endesa’s EBITDA, the following aspects should be taken into account:

 - The full consolidation of EGPE as of July 27th, 2016, which contributed 75 million euros.

 - The contribution in 2015 of non-recurring revenues of 184 million euros resulting from the exchange of European Union Allowances (EUAs) and Certified Emission Reductions (CERs) with European Union Allowances (EUAs)

 - The workforce restructuring provisions relating to Endesa's Restructuring and Reorganisation Plan, worth 226 million euros in 2016 and 380 million euros in 2015.

• Net of the abovementioned items, EBITDA increased by 348 million euros (up 10.8%) mainly due to the following factors:

 - The extremely positive performance of the gross margin in the liberalised market (+13% on a like-for-like basis). This increase is due to lower production costs (thermal production costs, lower taxes on generation and a reduction in fuel costs), and lower average electricity purchase costs due to the drop in wholesale market prices (down 21.2%), which largely offset the drop in average sale prices.

 - A steady progression in the regulated business, which represented over 63% of 2016 EBITDA. The gross margin of the regulated business is in line with that of the previous year.

 - The implementation of efficiency plans that have enabled fixed costs to be reduced by 3% compared with 2015 on a like-for-like basis.

 - In addition, the tax on nuclear power plants in Catalonia was adjusted after the ruling by the Constitutional Court of April 20th, 2016, which declared it unconstitutional. The net impact of this ruling in Endesa’s accounts in 2016 amounts to a positive 88 million euros. Furthermore, the reassessment of the subsidies for national coal has also been recorded for the 2012-2014 period, with a positive impact of 112 million euros.

• As a result, EBIT increased by 23%, notwithstanding a 1.8% increase in Amortisations and Impairment Losses mainly due to a 59 million euro increase for the full consolidation of EGPE.

• In line with the above results, Net income increased by 30%. Net of all the extraordinary items posted in 2015 and 2016, the increase would have been around 27%.

Cash flow and net financial debt

• Particular mention should be given to the solid generation of operating cash flow, which increased by 339 million euros due mainly to the increased net income (207 million euros after adjustments) and to the increased working capital (179 million euros).

• This strong cash flow generation is what led to Endesa’s net financial debt to increase by only 615 million euros compared with 2015, despite the acquisition of EGPE and its subsidiaries for 1,207 million euros and the payment of a 1,086 million euro dividend linked to the 2015 results.

Operating Results 2016

  2016  2015  Variation (%) 
GWh      
PENINSULAR OUTPUT UNDER ORDINARY REGIME  55,985 60,655 -7.7
LIBERALISED MARKET SALES 79,675 77,965 2.2
REGULATED MARKET SALES 13,815 14,934 - 7.5
ELECTRICITY DISTRIBUTED 115,602 114,190 1.2
GAS SALES 78,129 71,587 9.1

• Throughout 2016, electricity demand in the Iberian Peninsula continued the upward trend that it began in 2015, after decreasing for four years in a row, increasing by 0.6% compared with the preceding year (down 0.1% after adjustments for working days and temperature).

• Endesa’s peninsular electricity output under ordinary regime dropped, mostly due to the high availability of wind and hydro resources.

  - Nuclear and hydro technologies (carbon-free energy) represented 59.1% of Endesa's peninsular generation mix, compared with 54.3% during the same period of 2015.

  - Endesa’s production in the Non-Peninsular Territories (NPT) was 12,634 GWh, a 2.1% increase on 2015.

• In 2016, Endesa attained a 35.1% market share in peninsular electricity generation under ordinary regime, 43.7% in distribution and 35.3% in sales to liberalised market customers.

• The number of free market customers was 5,423,040 at the end of the year, a 6.7% increase compared with the same period of the preceding year.

Dividend proposal

Endesa’s Board of Directors has decided to submit a dividend distribution proposal for approval to the next Shareholders’ Meeting consisting of 1.333 euros gross per share (1,411 million euros), linked to 2016 results.

This figure represents a 30% increase on the dividends paid out against the 2015 financial results.

On 2nd January of this year, the company paid out a dividend linked to the 2016 results for a gross sum of 0.70 euros per share, which meant a disbursement of 741 million euros.

February, 23 2017

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