Endesa's ordinary net profit stands at €951 million after a 2023 financial year marked by extraordinary impacts

Grid and renewables, purpose of investment

Endesa has invested €2,304 million in 2023, with a slight decrease of 2% compared to the previous year - 2022 marked Endesa's all-time investment record. The distribution network has absorbed 38% of the total. Metrics that measure supply quality performance have shown clear improvement: Equivalent Interruption Time (that measures interruption time) was 49 minutes (five minutes less). Network losses also fell below 10% (9.6%).

The second business to be allocated the most investment was renewables, 34%. The new clean capacity added in the year is 600MW, bringing the total hydroelectric, wind and solar production capacity to 9,900MW. Thanks to this, and to nuclear generation, emission-free production in the peninsula reached 80% of the total, seven points more than at the end of 2022. In addition, the environmental processing of the renewable projects associated with the first, and only, fair transition processes in the Iberian Peninsula in Andorra (Teruel) and Pego (Portugal) continues.

In conventional generation, which was allocated a further 15% of annual investment, the main feature was the final closure of As Pontes, Endesa's last mainland coal-fired power plant and the largest of its kind in Spain. This meant that at the end of the reporting period, 78% of all the company's power installed in mainland Spain was free of CO2 emissions.

The company is also moving forward with the sale of a minority stake in its portfolio of photovoltaic projects in operation, and is currently in the final phase of the process.

The business of retailing electricity, gas and value-added services was allocated 12% of last year's investment. The total volume of electricity customers in the free market in Spain and Portugal grew to 6.9 million, in a year marked by a tightening of competitive conditions in which Endesa's proposal to protect customers from volatility has borne fruit. In this regard, fixed-price electricity sales to domestic and business customers increased to 53 TWh, two more than in 2022. Approximately 75% of these fixed-price sales were supplied from Endesa's emission-free production (nuclear, hydroelectric and regulated renewable energy).

Endesa has already sold 95% of its own production for 2024, about 85% for 2025 and 50% for 2026, which puts the company in a favourable situation in the current context with regard to the progressive normalisation of wholesale prices.

Electric vehicle charging stations increased by 39% to total 19,300, whilst there was an almost 5-times increase in the capacity of new self-consumption installations installed by Endesa for customers during the year to total 184MW.

In the gas business, in which 2022 had been an exceptional year, 2023 saw the margin affected by lower demand for consumption in combined cycle plants, lower consumption by industrial and residential customers, as well as by the impact of the arbitration decision regarding a price difference with a supplier of liquefied natural gas which was already spoken about at the last "Capital Markets Day" in November.

José Bogas, Chief Executive Officer, said about the 2023 business year:

"Following 2023 which was affected by extraordinary circumstances, we anticipate a return to growth for the current year based on the normalisation of market conditions. In particular, we are confident of a normalisation of margins in the gas and conventional generation business. We also expect a very limited impact from the current price environment as a result of our strategy for selling our own production in advance. For all these reasons, we reconfirm the objectives announced at the last Capital Markets Day: To achieve an EBITDA of between €4,900-5,200 million, which would represent an increase of between 11% and 18%; and to increase ordinary net profit by between 60% and 70%, to fall within the range of €1,600-1,700 million."

Financial performance

A deeper analysis of operating profit shows that there was a 19% decrease in EBITDA from deregulated businesses (generation and retailing) on a comparable basis as a result of the lower margin for conventional generation following an exceptional 2022. This circumstance was partially offset by an improved performance with regard to the renewable generation margin and a good performance in the commercial business area, following a 2022 in which it was affected by the impact from severe volatility.

EBITDA for the regulated distribution business improved to €1,757 million due to the absence of negative adjustments in the previous year

The company's net debt decreased to €10,400 million, €500 million less than a year earlier. A reduction that was based on a strong cash flow, which made it possible to compensate for the significant investment made and the payment of dividends. Gross debt decreased by 26% to €13,700 million as a result of a notable 82% decrease in collateral over the year.

The average cost of debt stands at 3.2%, reflecting the rapid and sharp rise in interest rates. The leverage ratio (net debt to EBITDA in comparable terms) stood at 2.4 times, up from 2 times at the end of 2022.

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