Despite lower generation, revenues and costs both rose as a result of regulatory changes in Spain regarding distribution as described below. Revenues totalled Euro 25,692 million, up 12.5%, variable costs increased by 15.7% and fixed costs by 14.7%, putting EBITDA at Euro 7,228 million (+4.8%).
EBIT fell 3.5% to Euro 5,052 million. The fall in EBIT with respect to the increase in EBITDA is owed to the Euro 515 million rise (31%) in the depreciation and amortisation charge, of which Euro 212 million correspond to one-off items.
Also in 2009, Euro 494 million of synergies were obtained with Enel, 113% of the stated target. The greatest savings were made through improved distribution practices (Euro 164 million) and improved generation and fuel practices (saving Euro 157 million). The rest of the synergies were obtained in systems and other areas such as underlying structure and general services.
Investments and debt in 2009
ENDESA invested Euro 4,180 million in 2009. Of this amount, Euro 3,493 million was capex and the remaining Euro 687 million corresponded to financial investments, including the acquisition of part of the assets of the Irish state electricity company, Electricity Supply Board (ESB), for Euro 444 million.
At 31 December 2009, ENDESA had net debt of Euro 18,544 million, an increase of Euro 4,541 million on the figure at 31 December 2008. This rise was due mainly to the Euro 6,243 million dividend payment that included the payment to shareholders of the entire capital gain made on the sale of assets to E.On in June 2008.
When assessing the company’s debt level, it must be remembered that at 31 December 2009, ENDESA had the recognised right to collect Euro 6,898 million in connection with several regulatory matters: Euro 4,656 million for financing the revenue shortfall from regulated activities and Euro 2,242 million in compensation for stranded costs in non-mainland generation.
Stripping out these regulatory items, ENDESA’s net debt at the end of December 2009 was Euro 11,646 million.
Business in Spain and Portugal
Net income in the electricity business in Spain and Portugal totalled Euro 2,759 million in 2009, up 24.9%, contributing 80.4% of the company’s total net income. The performance of this business line in 2009 and 2008 was shaped by the capital gains made on the sale of assets to Acciona and E.On respectively.
EBITDA (which does not include the effect of asset disposals) totalled Euro 4,060 million, 3.4% higher year-on-year. EBITDA increased despite the allocation of Euro 298 million in provisions relating to the company’s efficiency plan in the last quarter of the year.
The date has been brought forward due to a series of regulatory changes affecting the Spanish electricity system from 1 July, which have significantly altered the way it works:
The integral regulated tariff has been removed. Therefore, customers who have not signed a supply contract with a distributor will be supplied by last resort suppliers (LRS) offering power to their customers at the last resort tariff (LRT) set by the government on a half-yearly basis.
A power subsidy has also been approved for certain customers. This subsidy covers the difference between the LRT and a benchmark tariff known as the lower tariff. The difference will be financed by the generation companies, with ENDESA responsible for financing 36.77%.
Royal Decree Law 11/2007, according to which sector companies’ revenue was reduced in line with the market price of CO2 emission rights allocated under the National Allocation Plan was also repealed.
Other performance highlights of the electricity market in Spain in 2009 include the 4.3% fall in electricity demand vs 2008, and the drop in the wholesale market prices (40%).
In this context of regulatory change and across-the-board declines in demand and prices, ENDESA managed to keep a gross margin of 10.4% in 2009, due, among other factors, to the substantial increase in power sold to deregulated customers (up 27.4%) and the company’s improved production mix: with hydro-electric and nuclear energy accounting for 58% of power generated, compared to 33% in the rest of the sector.
ENDESA maintained its leadership position in the Spanish electricity market as a whole throughout the year. The company holds a 29.4% market share in ordinary regime electricity generation, a 43.2% share in distribution, 41.7% in sales to deregulated customers and a 42% share of total sales to final customers.
ENDESA reported revenues of Euro 17,473 million from its business in Spain and Portugal in 2009, an increase of 20.7%. Of this amount, sales accounted for Euro 16,435 million, year-on-year growth of 20.5%.
In 2009, the revenue shortfall from regulated activities for ENDESA stood at Euro 1,905 million.
ENDESA’s electricity output in Spain and Portugal dropped 16.7% to 74,287 GWh year-on-year. Of this amount, 71,513 GWh corresponded to Spain (-17.6%), 1,195 GWh to Portugal (-12.1%) and 1,579 GWh to the rest of the segment (+66%).
Despite the 20.6% drop in mainland generation and the fall in pool prices, revenues from electricity sales grew by 34.7% due to the smaller sales mix in the pool, which have been offset by higher sales to deregulated customers, and, above all, to the regulatory changes that came into force on 1 July 2009. To 30 June 2009 billing to regulated customers was not recorded as revenue as it was considered a pass through for distributors’ costs, while, from that date on, billing from LRS has been booked under revenues and related costs booked as operating costs.
ENDESA had 1,677,442 customers in the deregulated market at the end of 2009: 1,497,784 in the Spanish mainland market, 165,903 on the non-mainland market and 13,755 in European deregulated markets other than Spain.
Sales to all these customers totalled 60,781 GWh in 2009, up 27.4%, or Euro 5,652 million, up 19% vs 2008.
Investments in Spain and Portugal totalled Euro 2,972 million in 2009. Of this figure, 75.9% corresponded to capex for the development or improvement of electricity generation and distribution facilities.
Business in Latin America
In ENDESA’s Latin America business, net income rose 32.6% year-on-year in 2009 to Euro 671 million.
EBITDA rose 6.7% to Euro 3,168 million, while EBIT increased by 3.7% compared to 2008, to Euro 2,497 million.
The economic environment in ENDESA’s Latin American operating markets led to an overall slowdown in demand growth in 2009: demand fell by 1.3% in Argentina, 1% in Brazil and 0.7% in Chile but increased by 1.5% in Colombia and 0.3% in Peru.
Distribution sales by ENDESA companies totalled 63,745 GWh, an increase of 1.5% on 2008, with growth in Brazil (+3.4%), Colombia (+2.9%), Peru (+2.1%) and Chile (+0.4%). The only fall was in Argentina (-0.8%).
Despite this moderate demand growth, ENDESA’s generation output increased by 3.4% to 62,767 GWh in 2009, mainly due to higher hydro generation.
Output increased in Argentina (+10.1%) and Chile (+4.6%), and fell in Brazil (-2.0%). Colombia (-1.8%) and Peru (-0.6%).
New capacity development
Investment in 2009 totalled Euro 1,208 million, of which Euro 1,071 million was capex. In the last quarter of the year, the second phase of the 60 MW Canela II wind farm (Chile) got underway, in addition to the commercial start up of the 257 MW open-cycle TG Quintero plant in Chile, and the 200 MW Santa Rosa open cycle plant (Peru) which came onstream in September. Progress was also made on the construction of the 370 MW Bocamina II coal-fired plant in Chile.
The new wind energy facility will displace close to 90 thousand tons of CO2 emissions per year. The 40 wind turbines in Canela II generate a total of 60 MW, in addition to the 18.15 MW in operation since 2007. The Canela II wind power station, the biggest wind farm in Chile, was brought on stream by ENDESA. The project added another 60 MW to the Canela I wind farm, on stream since late 2007 in the Coquimbo (Chile) region, with 18.15 MW of power.
Endesa started to build the project in early February 2009, with the installation of 40 new wind turbines with 1.5 MW of power each, on an area covering 1,080 hectares. It is worth highlighting that the new Canela II wind farm will displace close to 90 thousand tons of CO2 emissions per year.
Additionally, the Quintero regasification terminal (in which ENDESA has a 20% shareholding and the right to buy 33% of regasified output) entered its first operational phase, supplying gas to ENDESA’s San Isidro I and II plants, among others.
In October 2009 ENDESA sold its 7.2% stake in Empresa Eléctrica de Bogota (EEB) for Euro 170 million, recording a gross capital gain of Euro 98 million.
In November 2009, the customer finance business of the Colombian company Codensa (Codensa Hogar) was sold for Euro 197 million, recording a gross capital gain of Euro 17 million.
Endesa is firmly committed to developing the electric vehicles and has launched and is actively participating in Cenit "VERDE", aimed at researching technologies that will permit Electric Vehicles (EV) to be introduced into the market.