Endesa outlines its roadmap for the next three years. The electricity company has cut the profit target for this year from 1,400 to 1,000 million after the blow suffered by the award with Qatar. However, it maintains the dividend policy and extends the 70% payout, guaranteeing a minimum of 1 euro per share. The forecast is that it will stand at 1.5 euros per share in 2026, which would mean a dividend yield of 8% and a total distribution of 4,000 million euros.
The International Court of Arbitration of the International Chamber of Commerce (ICC) has determined that it must disburse that 530 million euros – an amount not provisioned – for the review of the price of a long-term supply contract for liquefied natural gas (LNG) with Taste. The company’s own CEO, José Bogas, has stated that Endesa is studying the possibility of “opening an appeal.”
The board of directors met urgently on Wednesday of last week to evaluate a proposal to review its dividend policy for the period 2023-2026. Endesa has reported this Thursday within the framework of its ‘Capital Markets Day’ that it will distribute to shareholders an interim dividend against the results of the 2023 financial year of 0.50 euros gross per share. The payment will be made starting January 2, 2024 and will be made through Banco Santander, according to a relevant fact notified to the National Securities Market Commission (CNMV).
Warnings in the distribution of dividends
“Except when exceptional circumstances arise, which will be duly announced, the Board of Directors will ensure, for the years 2023 to 2026, both inclusive, that the ordinary dividend per share that is agreed to be distributed against the years is equal to 70% of the net ordinary profit attributed to the parent company in the group’s consolidated annual accounts, with a minimum equal to 1 gross euro per share for the years 2023 to 2026, both inclusive,” he clarified.
Furthermore, it remembers that the ability to distribute dividends among its shareholders depends on numerous factors, including the generation of profits, the availability of distributable reserves and the liquidity situation, so it cannot guarantee the dividends that will be paid in the years. future or what their import will be.
Refocuses its pillars and growth strategies
Initially, Endesa estimated that it would earn between 1,400 and 1,500 million euros this year. However, it has presented to the market the update of its strategic plan for the period 2024-2026, “in a context of higher financial costs and inflation that may affect the pace of electrification of the economy.” This situation, together with the necessary visibility on critical regulatory issues at a national and European level, has led the company to refocus its pillars and growth strategies.
In this way, the company has highlighted that the three strategic axes that emerged from this reevaluation process are profitability and flexibility, with the model of external partners and asset rotation in place, when deciding the destination of investments; the efficiency and effectiveness of operations, with greater cost control and maximizing cash generation; and financial and environmental sustainability.
After considering all these elements, Endesa sets the objectives for 2026 to achieve a gross profit (ebitda) of between 5,600 and 5,900 million and an ordinary net profit of between 2,200 and 2,300 million, driven by a “solid” evolution of the ebitda and “some “lower financial burdens, fiscal normalization after the end of the extraordinary tax and an increase in payments to minority partners as a result of the partner entry strategy to share projects.”
With respect to net debt, it is expected in the period to add between 10,000 and 11,000 million to liabilities, with which another 8,000 million will close in 2023 in net investments and 4,000 million in dividend payments; items that are compensated with 11,000 million in cash flow and 3,000 million in the contribution of the partners and the rotation of assets, according to the new collaboration model (‘partnership model’). With this, net debt will stand at 8,000-9,000 million in 2026, 10%-20% less than at the end of 2023. The ratio of net financial debt to EBITDA will be 1.4 times in 2026, from 2 .3 times estimated at the end of this year. The percentage of debt linked to sustainable criteria will exceed 80% at the end of the plan (64% in 2023).
Request a greater remuneration from the networks to invest more
For its part, the investment contemplated in the new strategy for the Iberian Peninsula rises by a slight 4% compared to the 2023-2025 plan, standing at 8.9 billion – the majority for Spain -. The amount allocated to networks in this plan (2,000 million net) is “conditioned on greater visibility on the 2026-2031 regulatory period in terms of the remuneration of investment in networks”, as its parent company Enel has already advanced.
Investment in renewables remains stable at 4.3 billion, with the objective of reaching 13,900 megawatts (MW) of power at the end of the plan and thus reaching 93% of emissions-free production on the peninsula. A greater commitment to wind power, which will absorb 1,600 MW (for 2,000MW of solar), while wind and hydroelectric repowering projects are the main novelties compared to the previous roadmap.
Full decarbonization by 2040
“The new, more selective strategy regarding the destination of investments optimizes our vertically integrated company model, while maintaining the flexibility that allows us to capture future opportunities. Networks and Renewables, key axes of the energy transition, are essential for Europe to “increase their energy independence, security of supply and achieve affordable energy. offer an attractive and sustainable dividend policy,” Bogas stressed.
Endesa maintains the total exit of coal in Spain in 2027, with the end of the operation of Alcudia, which is maintained for reasons of security of supply, and after achieving the closure of its largest coal plant (As Pontes) this year. The company’s full decarbonization is reconfirmed for 2040, when it will have abandoned the gas business as a whole. All this with the objective of moving towards the goal of the Paris Agreement of 1.5ºC of temperature increase compared to the pre-industrial era.
commercial strategy
The creation of an energy ‘mix’ for a more efficient, resilient and digitalized network on which it will rely, together with an investment of 900 million until 2026 for customers, to offer valuable services and a good customer experience to promote loyalty. It aims for a portfolio of free market contracts in Spain and Portugal of 7.5 million at the end of the period (7.1 million estimated at the end of 2023), which will help the total volume of liberalized electricity sales at fixed capacity reaches 53 terawatt hours (TWh). The integrated unit margin of the liberalized electricity business will remain stable in the period.
In the gas business, it foresees a recovery in margins after the “exceptional” 2023, highly affected by market volatility, while the customer portfolio will remain flat at 1.8 million, of which 1.4 million are in the free market.
THE NAIS IS OFFICIAL EDITOR ON NAIS NEWS