José Bogas: “The new energy model must be competitive for the customer and profitable for the investor”

• The company held its General Shareholders' Meeting at its headquarters in Madrid today. The Chief Executive Officer, José Bogas, highlighted the intense decade during which Endesa has been promoting decarbonisation and energy transition in Spain and Portugal. A process that represents a move towards to a new energy model that the company essentially sees as electric and that according to the company's top executive should be "first and foremost, competitive for consumers and profitable for investors."
• Attendance at the General Shareholders' Meeting represented a quorum of 83,694% of the company's capital and all the items on the agenda were approved. These included the appointment of Michela Mossini, Elisabetta Colacchia and Guillermo Alonso as proprietary members of the Board of Directors in the first two cases and independent in the third.
• Mr Bogas reviewed the pillars of the 2024-2026 strategic plan, endowed with €8,900 million: "The profitability and flexibility of investments, the efficiency of operations and cost control to maximise cash generation, and, finally, financial and environmental sustainability."
• Endesa envisages announcing a net ordinary income of between €2,200 and €2,300 million in 2026, with an EBITDA of €5,600-5,900 million, and a dividend per share of €1.5 in that year. The pay-out ratio of 70% is extended for one more year and a guaranteed minimum dividend of 1 euro is offered for the entire duration of the plan.
• The new economic regulation governing the distribution networks will be key to allocating the €2,800 million included in the plan, €200 million more than in the previous plan. In this regard, Mr Bogas emphasised that "Investing in networks is the key to making them resilient and providing them with new digital capabilities. Investing in networks is critical for them to be able to cover the model for the generation and consumption of distributed electricity. Energy Transition will not be possible without resilient grids of the right dimensions. This point is vital."
• Endesa has the capacity to increase its commitment to investing in networks beyond the plan, reaching the level contemplated in the National Integrated Energy and Climate Plan (PNIEC). But the regulation of this activity needs to be improved, the caps on investment eliminated and for there to be suitable remuneration so there is a reasonable return on investment. "The current regulations governing distribution are causing us to lose opportunities at the country level to attract companies, talent and the industrial sector," said the Chief Executive Officer.
• With regard to Generation included in the plan, Endesa is concentrating on what are the only two Fair Energy Transition projects underway in the Iberian Peninsula (Andorra and Pego, in Portugal, both awarded to Endesa) and on the wind energy plan in Galicia. In the face of growing local opposition and the judicialisation of renewable developments, Mr Bogas defended the company's model: "Local development with shared value projects and a commitment to sustainable integration. The different authorities need to provide legal security for investments in order for progress to be made in decarbonisation."
• There was special interest in the circumstances prevailing with regard to Generation in the Canary Islands, where the electricity production activity is regulated. Since 2013, no process has been launched to compete for new capacity and it is urgent to "replace, modernise and incorporate new generation capacity to guarantee supply and reduce emissions," Mr Bogas said.
• The development of a customer portfolio, a commercial activity that represents another €900 million in the 2024-2026 plan, expects to have 7.5 million open market customers by the end of the period. "We will develop our business strategy by encouraging and helping our customers prioritise the electrification of their energy uses."
• There is still a commitment to being a Zero Emissions company by 2040, with the goal of emission-free electricity production reaching 93% in Mainland Spain by 2026. With regard to gas, in addition to the recovery of margins after an unusual business year in 2023, Endesa expects a decrease in the use of gas in combined cycles due to the increase in renewable production.
• With regard to financial developments, the Chief Executive Officer reminded us that the goal for 2026 is to achieve a leverage ratio (net financial debt compared to gross profit, or EBITDA) of 1.4 times compared to 2.1 times by 2025 as per the previous plan. "This puts us in a position of opportunity to undertake greater investments, if the right business and regulatory circumstances are met," Mr Bogas reiterated. Net debt at the end of the plan will be between 10 and 20% lower than in 2023, somewhere between €8,000 and 9,000 million.
• The Chief Executive Officer of the energy company provided an overview of the main figures for the 2023 business year corresponding to business and financial developments, and again reminded us of the unusual circumstances encountered both with regard to the market situation for gas, as well as to regulatory changes and unfavourable arbitration decisions.
  
• José Bogas also recalled that next November marks the 80th anniversary of the creation of Endesa as a public company. In a volatile and turbulent environment, the executive pointed out the company's ability to adapt and, as a key asset within the Enel Group, to continue to be a benchmark for Energy Transition in the Iberian Peninsula. A company, he summed up, "that gives its shareholders added value, that generates employment, and that contributes to calm and constructive dialogue so that public-private collaboration becomes a reality".
  
• Along with the recognition of the effort and commitment of Endesa employees, Mr Bogas also had words of thanks for the entire Board of Directors, for Flavio Cattaneo, CEO of Enel, and for the new directors who have joined since being approved at the Shareholders' Meeting. "I would like to make a very special mention for Alicia Koplowitz, who has finished her time as a director of Endesa, whom I thank for her support and work over the years," added the executive.
  
• The non-executive chairman of Endesa, Juan Sánchez-Calero, reviewed the main developments in terms of the company's Corporate Governance and detailed the reasons behind the three appointments of new directors that have been approved.

Endesa held its General Shareholders' Meeting today at its corporate headquarters in Madrid, with a quorum representing 83,694% of the company's capital. At the beginning of his speech, the Chief Executive Officer, José Bogas, made special mention of the milestones reached during the decade with regard to the company's promotion of decarbonisation, together with the electrification of the economy in Spain and Portugal. He has also said he was in favour of an agile improvement and updating of economic regulation to boost investment in distribution networks in Spain, vital for the Ecological Transition, according to the company's chief executive. With regard to this same regulatory area, he reiterated the need to make a tender for the construction of new power generation installations in the Canary Islands, pending since 2013.

After reviewing the main financial and operational figures of the strategic plan 2024-2026 as well as the exceptional circumstances that affected the 2023 financial year, the Chief Executive Officer welcomed the three new directors: Michela Mossini and Elisabetta Colacchia, who were appointed as proprietary directors, and Guillermo Alonso, as an independent director. He also bid farewell to Alicia Koplowitz with thanks for the work done on the board over the past twelve years. Finally, Mr Bogas made a strong defence of the model of adaptation, resilience and success of the company that was born 80 years ago, an anniversary that will be celebrated next November.

Competitive and profitable electricity energy model

Mr Bogas started his speech to the shareholders by saying that "10 years ago, at the 2014 General Shareholders' Meeting, before the COP21 in Paris in 2015 where a historic agreement was reached by 195 countries to combat climate change, Endesa pointed out that the path for growth and adaptation to the new era involved the decarbonisation of our model for energy generation and for our industrial activity in general." And he listed the milestones and conclusions reached during these ten years:

• We are the only company with a social-economic support plan that has enabled us to be awarded the only two Fair Transition tenders that have been called for in Spain and Portugal: Andorra in Teruel and Pego in Portugal. This fact shows that Endesa does what it says and that the path towards decarbonisation, in the case of Endesa, is certain and identifiable.
• Last year we disconnected from the grid the last coal-fired power plant that remained active in the Iberian Peninsula, As Pontes and there are plans for development, if the circumstances are right.
• We can affirm that we have achieved our objectives while maintaining solid financial indicators. Endesa has been, is and aspires to continue to be the most important energy company in the Spanish market.
• We have crossed Cape Horn on our journey towards decarbonisation and electrification, but we still have a journey ahead of us.

In this regard, Mr Bogas identified some essential characteristics that Endesa considers should define the new energy model that emerges from this transition process. First, "that energy model is basically electric. A model based on clean energy and robust, resilient, smart distribution networks to deal with the effects of climate change and the new uses for electricity consumption and generation," he specified.

And secondly, this energy model is very different from the current one, but in addition to the challenges posed by the transition, "we are certain that the energy model should first and foremost be competitive for consumers and profitable for the investor".

Better regulation for more investment

Mr Bogas reviewed the pillars of the 2024-2026 strategic plan, endowed with €8,900 million: "The profitability and flexibility of investments, the efficiency of operations and cost control to maximise cash generation and finally, financial and environmental sustainability."

Endesa envisages announcing a net ordinary income of between €2,200 and €2,300 million in 2026, with an EBITDA of €5,600-5,900 million, and a dividend per share of €1.5 in that year. The pay-out ratio of 70% is extended for one more year and a guaranteed minimum dividend of 1 euro is offered for the entire duration of the plan.

The new economic regulation governing the distribution networks will be key to allocating the €2,800 million included in the plan, €200 million more than in the previous plan. In this regard, Mr Bogas emphasised: "Investing in networks is key to providing them with resilience and new digital capabilities; Investing in grids is critical so that they can cover a distributed electricity generation and consumption model. Energy Transition will not be possible without resilient grids of the right dimensions. This point is vital."

Endesa has the capacity to increase its commitment to investing in networks beyond the plan, reaching the level contemplated in the National Integrated Energy and Climate Plan (PNIEC in Spanish). But the regulation of this activity needs to be improved, the caps on investment eliminated and for there to be suitable remuneration so there is a reasonable return on investment. "The current regulations governing distribution are causing us to lose opportunities at the country level to attract companies, talent and the industrial sector," said the Chief Executive Officer.

Specifically, the executive referred to the data centre sector. "We are talking about an industry that sees Spain, due to its location, skilled workforce and electrical and fibre infrastructures, as an ideal place to grow significantly. However, this cannot be undertaken because of a lack of network capacity. One fact: Whilst in Ireland the electricity consumption of data centres is close to 20% of total demand, in Spain it is only 0.2%," he said.

In line with what is being proposed at the sectoral level, Endesa also considers that we urgently need to make progress in the regulation of the electricity distribution sector in order to increase investment. "Procedures need to be speeded up and there should be reasonable remuneration for capital which is similar to other countries in our region. This will guarantee the recovery of the costs incurred and recognise the investments made," said the Chief Executive Officer.

Also in the regulatory field, but in this case of the activity of electricity production in non-mainland systems, specifically in the Canary Islands. The 2024-26 Plan does not contemplate any investment in new capacity pending the next competitive bidding process. "There have been no competitive bidding processes for new capacity since 2013 and it is urgent to replace, modernise and incorporate new generation capacity to guarantee supply and reduce emissions," he stressed. Generally speaking with regard to the regulation of generation on the islands, he advocated for updating and improving it and streamlining the procedures to adapt it to current needs.