- The company is adapting to the ambitious 2030 electrification targets set by the NECP and anticipates a significant increase in investment in the electricity grid to 4 billion, which is 45% more than in the previous 2024-2026 plan, subject to regulatory improvements and updates.
- It is redirecting investment in renewables, totaling 3.7 billion, by reducing exposure to solar and focusing on higher-value assets: hydroelectric, with the acquisition of 626 MW in Aragon, and wind power developments.
- In sales, the focus is on expanding its customer portfolio in the competitive market to 7.1 million by the end of the period, enhancing the loyalty of those who contribute the most value.
- The new plan also provides additional financial capacity to accelerate investments that enable the exploitation of new opportunities arising from the energy transition by 2030.
- It anticipates closing 2024 by surpassing the forecast for ordinary net profit, which will reach 1.8 billion, and achieving an EBITDA of 5.2 billion, at the upper end of the estimate announced a year ago.
- It ensures a dividend of one euro per share until 2027, extends the 70% payout ratio to the entire plan, and increases the anticipated remuneration for 2024 by nearly 10% to 1.2 euros per share.
- It announces to the market that by 2027 it expects to achieve an EBITDA of up to 5.9 billion, a net ordinary result of up to 2.2 billion, and a net debt ranging between 10 and 11 billion.
Endesa has today announced to the market its new 2025-2027 strategic plan, which arrives at a pivotal moment in the energy transition journey and aims to fully leverage the opportunities and address the challenges arising from this process. The plan anticipates a total increase of 8% in investment, reaching €9.6 billion, which represents a historic record for the company since it began operating within its current operating area (Iberian Peninsula) in 2014. This provides an insight into Endesa's ambition for the upcoming years and the extensive opportunities it identifies in the Iberian energy sector.
The document, released as the company marks 80 years of supporting Spain's socio-economic development, focuses on a key theme: advancing clean electrification, centred on emission-free generation sources, as a means to address the primary challenges facing the energy sector across Europe. This will achieve a competitive energy system for customers, making it more secure by reducing external energy dependency, and sustainable by decreasing greenhouse gas emissions.
The document, presented to the investor community by the CEO, José Bogas, and the Chief Financial Officer, Marco Palermo, also considers the key figures and objectives outlined in the updated National Energy and Climate Plan (NECP) presented by the Spanish government last September. This document includes an investment forecast of €308 billion, 82% of which must be carried out by the private sector. Essentially, this new NECP is notable for its emphasis and increased ambition on the electrification of the economy (which will account for 17% of this investment, ten percentage points more than in the previous NECP); aggressive growth in new solar and wind capacity, as well as storage; and a strong commitment to an electricity grid with greater capacity and coverage. In the company's opinion, all this necessitates a more efficient administrative approval process and efforts with specific measures to boost electrification and electricity demand, along with the establishment of capacity payment mechanisms.
In more detail, the 55 TWh of new electricity demand outlined in the new NECP to reach 307 TWh by 2030 (excluding the demand for producing green hydrogen) is supported by two main pillars. First, a fourfold increase in electricity consumption in the transport sector, which necessitates a commitment to developing a robust recharging grid. And secondly, an anticipated 48% increase in industrial demand, which must also be accompanied by the development of the electricity grid required to support it.
By focusing on this new industrial demand, Endesa believes that the ability to meet it serves as a unique lever for Spain's reindustrialisation and economic growth. The competitive price of electricity generated from clean sources is an advantage for the country. Specifically, of the 50 GW of new capacity that has requested access to the grid at a national level (of which 16 GW comes from data centres), approximately 40% has been granted access. This would represent more than 30 TWh of new electricity demand by 2030, assuming a reasonable degree of success in the development of these projects.
Furthermore, the income from grid usage tolls that this new demand would generate is up to 9 times greater than the costs of modifying the electricity grid to accommodate it. This indicates that the dynamics of allowing industrial demand growth linked to a sustainable energy supply produce long-term benefits for the entire electricity system and the economy.
The NECP therefore anticipates that investment in grids (distribution and transmission) will reach €52.4 billion from 2021 to 2030, necessitating a threefold increase in the annual investment volume for both types of electricity grids during the remaining years of this decade. This enormous effort requires regulation to ensure:
- an adequate return on investment, with a rate ranging from 7.3% to 8.7%. More precisely, Endesa is targeting a rate of 7.5%.
- raising the current annual investment limit for grids
- an enhancement of the incentive system and a streamlining of administrative permits
Specifically regarding the data centre segment, Endesa perceives Spain as an exceptionally attractive hub for this sector due to its strategic positioning between Europe, Africa, and America, its strong technological connectivity, its reliable electricity grid, and its plentiful and competitive renewable electricity production. Endesa offers a comprehensive value proposition for data centre operators, ranging from site identification to grid connection, encompassing the administrative authorisation process. Nonetheless, the capacity for grid connection is a critical bottleneck that, once again, should lead to enhanced regulation of the distribution grid to enable its modernisation and growth.
José Bogas, CEO of Endesa, has outlined the key milestones of the plan, the company, and the current state of the energy sector: “We find ourselves at a pivotal moment for achieving the energy transition objectives set for 2030. Regulation must support us in achieving them. This new strategic plan lays the foundation for capitalising on the greatest opportunities possible in this context. And it grants Endesa substantial financial capacity to expedite and enhance the necessary investments. Ultimately, we are in the best sector at the best possible time.”
The grid, backbone of the energy transition
Diving deeper into the backbone of this new strategy up to 2027, it stands out that 42% of the planned investment will be allocated to the distribution grid. This accounts for 4 billion of the 9.6 billion euros, with a 45% increase compared to the investment allocated for this infrastructure in the previous 2024-2026 plan. Of these 4 billion, 45% will in turn be allocated to achieving the NECP objectives and addressing the increasing demand for new connections, which are currently being rejected due to insufficient capacity. Another 25% will be allocated to enhancing service quality by optimising the grid structure and increasing the remote operation of medium and low voltage lines. And the remaining 30% will be allocated to digitalisation and modernisation, by renewing components, upgrading the smart meter fleet, and implementing remote monitoring and control.
With this substantial investment effort, the regulated asset base of Endesa – currently the leading distribution grid operator in Spain – will increase to 12.1 billion euros, a 6% rise, by the end of the period.
In terms of the financial remuneration rate, and while awaiting a proposal from the regulator, Endesa has reiterated that a comparison with other countries where it has already been updated indicates that regulators in Germany, Italy, the United Kingdom, Denmark, and Finland have applied a spread exceeding 500 basis points over the yield of those countries' 10-year sovereign bonds.
In its presentation to investors, the company also highlighted the guidelines recently issued by the Ministry for the Ecological Transition to the CNMC for the revision of this rate: the presence of global competition for resources allocated to the energy transition; the need to enhance transmission and distribution grids to accommodate new consumption demands and connection requests from new renewable generation plants; and the need to establish appropriate remuneration to address the challenges of the transition without jeopardising the tariffs paid by the end customer.
Generation: pivot to higher-value assets
The generation business is the other key pillar of the strategic plan, accounting for 39% of the total: 3.7 billion euros. The criterion that will guide the company over the next three years is to rebalance the investment between technologies by reducing exposure to the solar sector (15% of the investment), in order to strengthen the wind (37% of the total) and hydroelectric sectors (another 37%). The remaining 11% will be allocated to battery storage.
Investment in hydroelectric assets already includes the one billion earmarked for the recent acquisition of 100% of Corporación Acciona Hidráulica, which is expected to be finalised in the first quarter of 2025. This operation involves adding an additional 626MW of hydroelectric capacity located in Aragon, Soria, Navarra, and Valencia (87% of which is manageable) to the existing 4,700MW of hydroelectric capacity. The average lifespan of these assets is 30 years.
This transaction is strategically significant as it aligns with Endesa's commitment to expanding its portfolio of renewable energy and is consistent with the company's sustainability efforts. By integrating these hydroelectric assets, not only are the sources of electricity generation diversified, but the company's vertically integrated business is also strengthened.
Taking all this into account, that is, the acquisition and investment in new assets, renewable production will increase by 32% by the end of the period, reaching 25 TWh. Up to 3GW of new capacity will be added, including the 626MW acquired last week, which will bring the total installed renewable capacity to 13.1GW by 2027.
It is also important to emphasise the focus on repowering, both in wind and hydro sectors, which will enhance the efficiency of these plants and lower generation costs. In this regard, there are already projects in progress such as the Aldeavieja wind farm (Ávila) and the Bárcena reservoir (Ponferrada), among others.
Endesa will maintain a selective approach when investing in renewable assets and will continue to use the model of collaborating with partners on these new projects.
In addition, Endesa will invest approximately 1,000 million euros (10% of the total) in conventional (combined gas cycles) and nuclear generation during the plan period, mainly for maintenance of nuclear generation assets, non-mainland systems and combined cycle plants.
Recovery of the customer base
The energy marketing and value-added services business will absorb an additional 900 million euros over the next three years. The objective is to restore the growth of the customer base to reach 7.1 million in the competitive market by the end of 2027, representing a 6% increase from the current 6.7 million.
Electricity sales will remain stable over the period at around 84TWh, with a strategic shift towards fixed price sales (primarily targeting the residential sector) as opposed to sales linked to spot market prices.
The customer-focused strategy, which encourages the electrification of their energy uses, will concentrate on those with the highest value to the company, promoting their long-term retention. Endesa will prioritise reinforcing commercial channels, enhancing their digitalisation, and providing high-value services tailored to the increasingly sophisticated demands stemming from the energy transition.
Reinforcing the 2040 Net Zero Target
This entire review of the strategy in the three major foundational pillars of the business is accompanied, across the board, by a reaffirmation of Endesa's commitment to environmental sustainability. The objective of reaching Net Zero emissions by 2040, through the generation and sale of 100% renewable energy, accompanied by the withdrawal from the gas retail business as customers transition to electrification, remains valid.
Endesa's CO2 emissions will have been cut by 65% by the end of 2024 compared to the baseline year of 2017. This percentage will be 74% in 2030. The company's final coal power plant in the Balearic Islands, which operates for supply security reasons, is scheduled to close in 2027, pending the necessary administrative approvals. And the company's just transition process will continue to rely on the retraining of employees from businesses that are phased out for their redeployment in other company activities.
The roadmap towards achieving a Net Zero company by 2040 is aligned with the 2015 Paris Agreement, which aims to limit the global temperature increase to no more than 1.5 degrees Celsius above pre-industrial levels, encompassing both direct and indirect emissions reductions.
Main financial objectives and dividend update
Regarding the key financial metrics outlined in the plan, they aim for a cumulative annual growth of 4% in EBITDA (gross operating profit), targeting between 5.6 and 5.9 billion by 2027. Target ordinary net profit of between 2,000 and 2,200 million by the end of the period, representing a cumulative annual growth rate of 7%. And target net debt of between 10 and 11 billion, a 10% increase due to increased investments and dividend payments, which will be offset by strong cash flow and the contribution of external partners joining renewable projects.
Regarding the dividend policy, the company has extended its commitment to a 70% pay-out ratio (the percentage of ordinary net profit allocated for shareholder remuneration) until 2027, guaranteeing a minimum of 1 euro per share and payment in cash. Endesa estimates a dividend of 1.2 euros per share from the 2024 results, which is 20% higher than in 2023 and 9% more than the forecast announced a year ago. A first instalment of 0.5 euros will be paid on 8 January. The goal is to achieve 1.5 euros per share by 2027. Consequently, the overall dividend yield for the plan will fluctuate between 6% and 7%.
Regarding the electricity margin, it is expected to remain stable over the period, ranging from 55 euros/MWh at the end of 2024 to 56 euros/MWh in 2027. Regarding the coverage of fixed-price sales with the company's baseload generation (nuclear, hydroelectric, and renewable), this is set to increase to 90% by the end of the plan, up from 80% in 2024, thanks to the expansion of the renewable generation capacity.
The gas business unit margin is projected to increase from 3 euros/MWh to 6 euros. The customer base on the competitive market is projected to grow by 8% to 1.4 million. Total gas sales are expected to decline by 34%, due to the termination of contracts with two international suppliers, alongside the normalisation of the use of combined cycle power plants and a rebalancing of the sales mix.
About Endesa
Endesa is a leading electric company in Spain and the second largest in Portugal. Additionally, it is the second largest gas operator in the Spanish market. It operates an integrated business that comprises electricity generation, distribution, and commercialisation. As one of the main operators of charging points in Spain, Endesa also offers electric mobility services, along with other value-added services aimed at electrifying energy uses at homes, businesses, industries, and public administrations. Endesa is firmly committed to the United Nations’ SDGs and actively promotes the development of renewable energies through Enel Green Power España, digitalisation of grids via e-distribution, and corporate social responsibility. In the latter area, we also work through the Endesa Foundation. Our team comprises around 9,000 employees. Endesa is part of Enel, the largest electricity group in Europe.