GuruFocus -
- EBITDA: EUR2.4 billion, nearly in line with the first half of 2023.
- Net Income: EUR0.8 billion, a decrease of 9% compared to the previous year.
- FFO (Funds From Operations): EUR1.2 billion year-to-date.
- Capex: Decreased by 16% year-on-year.
- Renewable Capacity: Expanded to more than 10 gigawatts.
- Emission-Free Production: Increased to 90% of total mainland production, up from 82% in 2023.
- Electricity Prices: Average prices in the first half of 2024 were 56% lower than last year.
- Liberalized Power Sales: Decreased by 3% to 37 terawatt hours.
- Gas Sales: Decreased by 20%.
- Net Financial Debt: EUR10.8 billion, 4% higher than the previous period.
- Cost of Debt: Increased to 3.6%.
- Leverage Levels: Maintained below 3 times net debt over EBITDA.
- FFO over Net Debt Ratio: 40%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Endesa SA (ELEZF) achieved an EBITDA of EUR2.4 billion, nearly matching the first half of 2023.
- The company expanded its renewable capacity to over 10 gigawatts, increasing emission-free production to 90% of total mainland production.
- Energy losses improved by 0.4 percentage points, indicating progress in quality indicators.
- Endesa SA (ELEZF) maintained a strong free power margin at EUR58 per megawatt hour.
- The company has secured most of its 2024 inframarginal output and significant portions for 2025 and 2026, providing stability in energy pricing.
- Net income decreased by 9% compared to the previous year.
- Capex slowed down by 16% year-on-year due to more selective capital allocation.
- The customer base contracted due to intensified competition and sustained low prices.
- Mainland electricity demand in Endesa's area decreased by 1.4%, adjusted to 0.8%.
- The technological obsolescence of the non-mainland generation fleet remains a concern, with inadequate regulatory support for investment needs.
A: Regarding social tariffs, we are optimistic and believe it could add around EUR150 million, potentially moving us to the top of our guidance. On the competitive landscape, competition intensified in the first half of 2024 due to reduced electricity and gas prices, aggressive activity from oil and gas companies, and strong competitiveness of regulated tariffs. Repsol (BME:REP) is leveraging its position in the petrol and service station market by subsidizing electricity through fuel discounts.
Q: Can you elaborate on your comment about the 7.3% to 8.7% returns? What are your cost of capital assumptions for that number, and which countries are you comparing with?
A: We compared the regulation of countries like Italy, UK, Germany, Belgium, Sweden, Austria, and Finland. By applying Spanish parameters to these countries' regulations, we derived a range of 7.3% to 8.7% for returns, reflecting where we should be considering the current situation.
Q: What are your expectations for the Spanish electricity market and your market share, given the loss of over 200,000 clients? What commercial actions are you taking to prevent further losses?
A: The loss of clients was mainly due to very low electricity and gas prices, which encouraged competition. We expect prices to rise in the second half of the year, reducing competition. We are focusing on stabilizing our portfolio by targeting high-value customers with tailored products and services and enhancing customer loyalty.
Q: Can you update us on your intention to agree on a partnership in solar? Is the project still ongoing, and are there any obstacles?
A: We are in advanced talks to conclude the sale of a minority stake in our solar operating capacity and aim to complete the transaction shortly. There have been ongoing discussions, but we are now very close to finalizing the deal.
Q: What is your view on the potential extension of the 1.2% revenue tax without improving deductions?
A: The current law applies the 1.2% levy only to 2023 and 2024. The government initially aimed to make it permanent with deductions for energy transition investments, but details are unknown. The levy is a competitive disadvantage under European law, and we have appealed it. The process may take years to resolve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.