Exceptional market conditions registered in 1Q 2017 and 1Q 2016 affected EBITDA and net income in the two periods under exam: high hydro and wind output in 1Q 2016 depressed pool prices, while 1Q2017 was characterised by increased use of thermal plants and, as a result, extraordinarily high prices.
|1st Quarter 2017||1st Quarter 2016||Difference %||Difference (%) without extraordinary items (1)|
|OPERATING CASH FLOW||536||665||-19|
|NET FINANCIAL DEBT||5,495(2)||4,938(3)||11|
(1) Excluding EPGE contribution in both periods.
(2) At March 31st, 2017.
(3) At December 31st, 2016.
Endesa’s CEO, José Bogas, commented “The drop in net income took place against an extremely complex scenario, with a huge increase in demand during the first weeks of the year, which had to be met through more expensive technologies, given the significant reduction in hydro and wind resources. This situation led to an exceptional price increase in the wholesale market, which negatively impacted on the company’s energy purchases. The stability of our regulated businesses, which contained fixed costs and the acquisition of up to 100% of Enel Green Power España, mitigated this exceptional negative impact, which has gradually begun to normalise and is expected to diminish in the course of the year”.
- Revenues increased by 7%. However, the costs of purchasing electricity to be sold to end customers as well as fuel consumption costs in thermal power plants have increased significantly, leading to a 6% reduction in the gross margin and reaching 1,236 million euros.
- When analysing EBITDA progress, the following factors need to be taken into account:
- The free market margin recorded a significant drop (-18%), due, on the one hand, to the increase in production costs as a result of greater thermal power production, higher taxes on generation and a rise in the cost of fuels; and, on the other hand, the hike in average electricity purchase costs, through a 84% increase in the wholesale market price (which reached 55.6/MWh). These negative effects have been partially offset by the increase in average sale prices.
- The gross margin of the regulated business increased by 4%, reaching 774 million euros, which has partially offset the drop in the deregulated business margins.
- These results have also been partially offset by Enel Green Power España’s contribution (57 million euros) to Ebitda, illustrating that the diversification strategy of the production mix, boosted by the purchase of up to 100% of this company, is proving to be very successful and also constitutes a solid growth platform for Endesa.
- Fixed costs on a like-for-like basis dropped by 2%, i.e. net of the acquisitions of Enel Green Power and ICT division of Endesa Servicios, compared with the first quarter of 2016.
- EBIT dropped by 27% mainly reflecting the decrease in EBITDA.
- Furthermore, Amortisations and Impairment Losses increased by 9%, reaching 362 million euros, mainly due the consolidation of 100% of Enel Green Power España (30 million euros).
- On the other hand, Endesa has reassessed the useful life of assets in operation and modified the amortisation policy of hydro, wind and photovoltaic plants, which has enabled amortisation costs to be reduced by 16 million euros.
- As a result of all the aforementioned factors, net income dropped by 26%.
Net financial debt, cash flow and investments
- Operating cash flow dropped by 129 million euros, mainly due to the decrease in EBITDA.
- Net financial debt increased by just 557 million euros compared with December 31st, 2016, despite Endesa paying its shareholders a dividend on 2016 results in the amount of 0.7 euros gross per share, equivalent to a total disbursement of 741 million euros.
- During the first quarter of 2017, Endesa’s gross investments stood at 261 million euros (+11%), of which, 241 million euros relate to investments in tangible and intangible assets and the remaining 20 million euros relate to financial investments.
|1st Quarter 2017||1st Quarter 2016||Difference (%)|
|PENINSULAR OUTPUT UNDER ORDINARY REGIME||14,922||12,411||20.2|
|DEREGULATED MARKET SALES||20,075||19,835||1.2|
|REGULATED MARKET SALES||3,561||3,842||-7.3|
(1)Without consumption pertaining to generation.
- During the first quarter of 2017, the demand for electricity in the Spanish mainland system increased by 0.2% compared with the same period of 2016. The increase is around 1.1% adjusted for working days and temperature.
- Renewables generation in the Spanish mainland system during the period met 38.3% of the mainland electricity demand, given the scarcity of hydro and wind resources, while it represented 49.6% during the same period of the previous year.
- Endesa’s mainland electricity production under ordinary regime increased by 20.2% as a result, mainly, of the scarcity of wind and hydro resources, which meant having to significantly increase thermal power plant production.
- Nuclear and hydro technologies (carbon-free technologies) represented 58% of Endesa's mainland generation mix, compared with 70.9% during the same period of 2016.
- Endesa’s production in Non-Peninsular Territories (NPT) was 3,064 GWh, a 3.8% increase recorded on the same period in 2016.
- In turn, Endesa’s production from renewable technologies, other than hydro, reached 994 GWh.
- Overall, during the first quarter of 2017, Endesa reached a 35.6% market share in mainland electricity generation under ordinary regime, 43.3% in distribution and 35.3% in sales to free market customers.
- The number of free market customers stood at 5,440,079 at the end of the first quarter of this year, a 0.3% increase compared with December 31st, 2016.
Endesa’s General Shareholders Meeting held on April 26th approved the distribution of a dividend on 2016 net ordinary income for a gross amount of 1,333 euros per share, equivalent to a total of 1,411 million euros. This amount equals Endesa’s consolidated net income of 2016.
Taking into consideration the interim dividend of 0.7 euros gross per share (equivalent to a total of 741 million euros) paid on January 2nd, 2017, the balance dividend is equivalent to 0,633 euros gross per share (a total of 670 million euros). The balance dividend shall be paid on 3 July 2017.
Endesa is also expected to pay a dividend per share on 2017 results of at least 1.32 euros per share.