Endesa overcomes Covid impact in 2020 with a 36% increase in net ordinary income

  • The electricity company increased its EBITDA on a like-for-like basis to 4,027 million euros, up 5%
  • Endesa reported net ordinary income of 2,132 million euros last year, 36% higher than in 2019, exceeding guidance
  • This growth in profit will enable it to distribute a dividend 6% above the expected figure: 2.014 euros per share.
  • EBITDA compared on a like-for-like basis with the previous year also rose to 4,027 million euros, 5% more than the forecast of 3,900 million euros.
  • Endesa showed resilience in a challenging year like 2020 while gaining flexibility for the future thanks to efficiency measures in the thermal generation, distribution and supply businesses
  • The company was also widely acclaimed for its progress in sustainability during the year: 15% of its shareholders are already linked to ESG criteria and the company maintains a prominent presence in the world’s main socially responsible investment indexes
  • Progress in decarbonisation with the closure in June of the Compostilla and Teruel power plants will enable the company to achieve the CO2 emission-free production target set for mainland Spain for 2022 by 2020: 85%. The new target for 2023 is to reach 89%.
  • Stronger leadership in electric mobility with a network of 7,100 public and private charging stations by the end of 2020, 42% more than by year-end 2019
  • Improved debt levels compared to guidance, with net debt of 6.9 billion euros. The average cost of debt was lower than the already very competitive level of 2019: down from 1.8% to 1,7%. Gross debt to EBITDA ratio rose from 1.7 to 1.8 times

Endesa today presented its results for the year 2020, showing strong performance despite the challenges posed by the impact of the pandemic. The company is already reaping the rewards of its firm commitment to sustainability, both in terms of international recognition and progress in decarbonisation. Endesa can now meet its greenhouse gas (CO2) emission-free electricity generation targets two years ahead of schedule. Specifically, the year closed with 85% of mainland generation free of GHG emissions, a goal initially planned for 2022.

First, Endesa achieved ordinary net profit of 2,132 million euros, 36% more than in 2019. This figure is the basis for the distribution of the dividend, which will exceed guidance announced to the market, rising to 2.014 euros per share, 37% more than the previous year. This will bring Endesa’s dividend yield to approximately 9%, based on the share price at 31 December. Endesa will pay out 100% of its 2020 ordinary net profit to its shareholders. Starting in 2021, it will undertake a new pathway of gradual reduction of the payout from 80% for the current year to the 70% announced for 2022 and 2023 to adapt to the significant increase in investment planned for the coming years: 7.9 billion euros between 2021 and 2023, and 25 billion euros through to 2030.

Net income attributable to the Parent, which takes into account the extraordinary impacts of the year, amounted to 1,394 million euros, including an impairment of generation assets in non-mainland territories of 253 million euros. In 2019 this figure stood at 171 million euros after being strongly influenced by the provision for the closure of the coal-fired generation business (1,105 million euros) and another related to non-mainland generation (304 million euros).

EBITDA (gross operating profit) grew 5% compared to 2019 on a like-for-like basis (excluding impacts on personnel expenses arising from the application of the 5th Framework Collective Bargaining Agreement and provisions associated with the Process Decarbonisation and Digitisation Plan). The figure came to 4.027 million euros. If these items are taken into account, this figure stands at 3,783 million euros, a decrease of 1.5% with respect to the previous year. Endesa took a 120 million euro hit to its EBITDA as a result of covid.

José Bogas, CEO of Endesa, said about 2020 performance: “We achieved strong operational and financial performance in a year that was full of challenges at all levels due to the impact of the pandemic. We continue on our path of decarbonisation, digitalisation and electrification on the basis of robust results that will also allow us to distribute a truly outstanding dividend in the current climate. 2020 is also the year in which we have tangibly materialised our motto of leaving no one behind, neither as a result of the Energy Transition process that we believe must be fair, nor as a result of the Covid pandemic, against which we have deployed a Public Accountability Plan endowed with 25 million euros.”

2020 € million 2019 € million Change   (%)
REVENUE 17,560 20,158 -12.9%
EBITDA 3,783 3,841 -1.5%
EBIT 1,886 388 +386%
NET INCOME 1,394 171 +715.2%
ORDINARY NET PROFIT 2,132 (1) 1,562 (2) +36.5%
OPERATING CASH FLOW 2,951  3,181 -7.2%
FIN. DEBT NET (3) 6,899 6,377 8.2%
GROSS INVESTMENT 1,846 2,202 -16.2%

(1) Net ordinary income FY2020: Reported net income (€1,394 million) – Net impairment losses on non-financial assets over €10 million (€-266 million) – Initial personnel expenses provision for restructuring plans due to decarbonisation plan and digitalisation process (€-450 million) – net expenses relating to Public Accountability Plan due to the COVID-19 health crisis (€-22 million) = €2,132 million.

(2) Net ordinary income FY2019: Reported net income (€171 million) – gains/(losses) for transfers of non-financial assets over €10 million (€18 million) – Net impairment losses on non-financial assets over €10 million (€-1,409 million) = €1,562 million.

(3) Data at 31 Dec.

 

Decarbonisation and efficiency

During 2020, the company continued on its clear pathway to decarbonise the generation mix. The June closures of the Compostilla and Andorra plants, which operated with domestic coal, resulted in a 43% reduction of installed capacity (2,100 MW) that operates with this technology. The outlook is to move forward during 2021 with the closures of the other 2,500 MW distributed across As Pontes and Carboneras, which will leave only 200 MW in operation with this technology located in the Balearic Islands.

Only 1% of Endesa’s revenue came from its coal generation business and the share of electricity from this fossil fuel in the total electricity produced by Endesa was only 2.5% in 2020.

The volume of installed capacity in renewable sources (hydro, solar and wind) grew by 400 MW, to end the year at 7,800 MW. Thanks to this increase in clean power, alongside the decline in installed coal-fired capacity, Endesa’s electricity production in the Iberian Peninsula was 85% free of CO2 emissions. Electricity production from renewable sources increased by 33% to 13.4 terawatt-hours.

For the development of its 2021-2023 investment plan, Endesa has a project pipeline of 6,700 MW of renewable power with access point and grid connection at the end of the year. This capacity will comfortably cover the increase in renewable energy plants of up to 3,900 MW included in the strategic plan for the next three years. In addition, the company was awarded 50 MW of photovoltaic power in the auction launched by the government last January. In total, Endesa’s renewable projects pipeline, at various stages of government permit maturity, amounts to 42,000 MW.

Moreover, Endesa took several decisions throughout 2020 to be better able to face the future challenges of the energy market in this decade of Energy Transition. First, it recognised a provision of 213 million euros in the third quarter to restructure the workforce associated with the coal-fired generation business, which the company is exiting. Secondly, in the fourth quarter it recognised a provision of another 387 million euros to cover the cost of generating efficiencies linked to the digitalisation of the Distribution business, mainly, and also of Marketing. In addition, during the first quarter, Endesa booked a provision of 159 million euros to restructure its workforce in general. 

2020 GWh 2019 GWh Change (%)
OUTPUT 56,269 61,402 -8.4%
DEREGULATED MARKET SALES (1) 69,430 78,056 -11.1%
REGULATED MARKET SALES (1) 11,342 11,385 -0.4%
ELECTRICITY DISTRIBUTED 105,743 111,587 -5.2%
GAS SALES (2) 70,045 79,784 -12.2%

(1) Net sales to end customers.

(2) Excluding own generation consumption.

Boosting sustainability and electrification

The company’s total investment in 2020 amounted to 1.6 billion euros. This figure was down 19% compared to 2019 for two reasons. First and most importantly, because in the previous year a major investment effort was made to put into operation the renewable capacity awarded in the 2017 auctions (almost 900 MW). Secondly, the slowdown of some renewable plant projects during the pandemic lockdown. 88% of the investment was allocated to the development of facilities or technologies related to Sustainable Development Goals (SDGs 7, 9, 11 and 13). Mainly renewable energies and digitalisation and improvement of the distribution network.

The commitment to sustainability was widely and positively recognised by the main world indexes that evaluate this vector. Specifically, VigeoEiris ranks Endesa second in the world and second in the Electricity and Gas sector ranking; S&P Dow Jones places the company seventh in the overall ranking and fifth in the list of electricity companies; FTSE ranks Endesa second in the world in electricity companies; Sustainalytics ranks Endesa 14th out of 256 electric utilities and 44th out of 574 utilities as a whole; for CDP, Endesa is the absolute leader; MSCI assigns it an AA rating; and Endesa is one of the 100 global companies also included in the Bloomberg Gender Equality Index.

Furthermore, 15% of Endesa’s free float on the stock exchange (half of its entire free float) is in the hands of shareholders who are guided by ESG (Environmental, Social and Governance) criteria when deciding on their investment choices.

In terms of electrification, Endesa felt the impact of growing competition in the Spanish market and ended 2020 with an electricity customer base of 10.4 million. Energy sold to customers declined by 10% to 89 terawatt-hours, chiefly due to lower consumption in the corporate segment (industrial and services sectors). Residential customers in the regulated and unregulated markets alike maintained their consumption at virtually the same level as in 2019.

A more positive was struck by the rollout of the network of charging stations for electric vehicles, which in one year grew by 42%, reaching 7,100 chargers, including the public network and stations installed for private customers. As announced in November during the update of its strategic plan, the company intends to increase this figure eightfold to 56,000 stations by the end of 2023.

Financial strength and sustainability

As to financial management, Endesa improved its average cost of financing compared to the previous year: a reduction of a tenth of a point to 1.7%, one of the most competitive rates among major Spanish listed companies. The ratio of net debt to EBITDA rose from 1.7 to 1.8 times.

The company’s net debt was 6,899 million euros at the end of 2020, an improvement on initial guidance. In addition, Moody’s upgraded Endesa’s long-term rating to Baa1, with a stable outlook. Last week, Fitch confirmed the rating at A-, with a stable outlook.

The sustainability vector is also key in the financial management of Endesa. At year-end the company had 45% of its gross debt of 7.3 billion euros linked to sustainability criteria. During the year, the volume of financing transactions related to this type of criteria amounted to 5.8 billion euros. Within this figure, a highlight was the first corporate commercial paper program at European level (Euro Commercial Paper) linked to Sustainable Development Goals for a maximum amount of up to 4,000 million euros, registered in Spain and supervised by the CNMV.

Luca Passa, the chief financial officer, says: “Endesa is building on its commitment to link its financial transactions to the sustainability goals that guide the operation of the company as a whole. Our 2021-2023 strategic plan further supports this strategy and sets a target of raising the percentage of gross debt linked to sustainability goals to 60% by the end of the period.

About Endesa

Endesa is the largest electricity company in Spain and the second largest in Portugal. The company is also the second largest gas operator in the Spanish market. Endesa operates an end-to-end business from generation to marketing and through Endesa X also offers value-added services aimed at the decarbonisation of energy uses in homes, companies, industries and public administrations. Endesa is firmly committed to the United Nations SDGs and therefore strongly supports the development of renewable energies through Enel Green Power España, the electrification of the economy and Corporate Social Responsibility. The Endesa Foundation is also active in CSR. Our workforce numbers around 9,600 employees. Endesa is a division of Enel, Europe’s largest electricity group.

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