(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:
o 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.
o 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.
o 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.
o 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.
o 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).
o 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.
o 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.