Endesa net income up 47% driven by positive performance in the free market

(1) As of December 31st, 2017.

Endesa's CEO, José Bogas, said: “The integrated margin management combined with the normalisation of conditions in the market, the significant improvement in the gas market, the positive development in the regulated business and the reduction of the company’s fixed costs as a result of the efficiency plans implemented in recent years are the key factors behind the excellent results achieved in the first quarter of 2018. Furthermore, we are well on our way to reach the targets set for this year.”

Endesa’s results in 1Q 2018 have been very positive with significant increases in EBITDA, EBIT and net income. This improved performance is partly explained by the fact that the results in 2017 were impacted by negative market conditions in Spain which resulted in unusually high energy prices in the wholesale market. In 1Q 2018, this situation normalised thanks to the greater availability of hydro and renewable resources, leading to a 13.5% decrease in wholesale electricity market prices and contributing to the company’s positive results.

• EBITDA increased by 25% mainly due to:

The company’s strategy in the free market, which allowed for a 38% increase in the margin and a 113% growth of the business’ EBITDA, thanks to:

A scenario in which wholesale market electricity prices dropped by 13.5%.

The extremely positive performance in the gas market, which contributed 54 million euros to the company’s gross margin in the period, compared to the 20 million euro losses posted in the same period of 2017.

A 1% increase in the regulated business margin, mainly due to the improvement in distribution remuneration.

Fixed operating costs in 1Q 2018 in line with the same period last year; on a like-for-like basis, they have fallen by 4%, mainly thanks to workforce management optimisation.

• EBIT grew by 49% in line with the EBITDA increase and as a result of stable amortisation costs.
• As a result of all of the above factors, net income increased by 47%.

Operating cash flow, net financial debt and investments

• Operating cash flow in 1Q 2018 was lower than in the same period of last year due to an exceptional swing in net working capital, which will revert over the course of the fiscal year.
  
• Net financial debt increased by 1,062 million euros compared to December 31st, 2017, as a result of a combination of factors, including the abovementioned swing in net working capital impacting operating cash flow and the payment in January 2018 of a 0.7 euros gross per share dividend for the 2017 fiscal year, equal to a total of 741 million euros.
• Gross investments amounted to 197 million euros (+18%).

Operating results 

(1) Without own consumption for electricity generation.

• In 1Q 2018, the demand for electricity in the Spanish mainland system grew by 2.9%, equal to 2% adjusted for working days and temperature,
• Renewable generation in the period accounted for 43.2% of total mainland electricity demand, whereas it represented 38.3% during the same period of the previous year.
• Endesa’s production fell by 2.5% due to lower thermal production as a result of an increase in large hydro and wind generation in Spain.
  • The CO2 emissions-free technologies (hydro, wind, solar and nuclear) represented 53% of Endesa’s mainland generation mix in 1Q 2018, beating the 51% posted in the same period of 2017.
  • Endesa’s production in Non-Mainland Territories (NMT) was 3,115 GWh (+0,9%).
• Overall, in the period Endesa attained a 22.9% market share in mainland electricity generation, 43% in distribution, and 34.3% in sales to free market customers, confirming its leadership in the Spanish electricity market.
• The Company’s free market customer base amounted to 5,617,292, a 0.4% increase compared with December 31st, 2017.
• During 1Q 2018, the gas demand grew by 6.5% compared to the same period of last year. On March 31st, 2018, Endesa achieved a market share of 16.2% in gas sales to free market customers.

Dividends

Endesa's General Shareholders’ Meeting held on April 23rd, 2018 approved the distribution of a total dividend on 2017 net ordinary income for a gross amount of 1.382 euros per share, equal to a total of 1,463 million euros, an amount equal to Endesa's 2017 consolidated net income.

Taking into consideration the interim dividend of 0.7 euros gross per share (741 million euros) paid on January 2nd, 2018, the balance dividend for 2017 is equal to 0.682 euros gross per share (722 million euros) and will be paid on July 2nd, 2018.