Endesa S.A. Unsponsored ADR ((ELEZY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Endesa S.A. Unsponsored ADR painted a picture of strong financial growth and strategic achievements, yet highlighted ongoing challenges within the regulatory framework. The sentiment expressed during the call was cautiously optimistic, buoyed by impressive financial performance but tempered by uncertainties in regulatory conditions affecting distribution networks and rising ancillary services costs.
Strong Financial Performance
Endesa reported a robust financial performance, with EBITDA reaching EUR 4.2 billion, marking a 9% increase year-on-year. Net income also saw a significant rise, hitting EUR 1.7 billion, up by 22% compared to the previous year. The company demonstrated strong cash generation, with funds from operations (FFO) increasing by 29% to EUR 3.4 billion.
Strategic Acquisitions and Partnerships
In a strategic move, Endesa acquired the remaining 62.5% stake in Cetasa, allowing for full consolidation of its wind asset portfolio. Additionally, the company entered a strategic agreement with MasOrange to offer combined energy and telecom services, including the acquisition of Energía Colectiva.
Share Buyback Program Progress
Endesa has made significant progress in its share buyback program, completing the second tranche and launching a third tranche with a target of up to EUR 500 million, expected to be executed by February 28th next year.
Emission-Free Output
The consolidation of new renewable capacity has enabled Endesa to achieve a 79% emission-free output, underscoring its commitment to sustainability and reducing carbon emissions.
Mainland Demand Growth
There was a notable increase in mainland demand, which rose by 2.4% year-on-year. Endesa’s area demand saw an even larger increase of 4.2%, with the service sector demand in the Aragon area growing by 9%, driven largely by data center activity.
Distribution Remuneration Framework Challenges
The current proposal for the distribution remuneration framework was criticized for not providing adequate support and incentives necessary for the investment efforts required by the National Energy Plan.
Uncertainty in Regulatory Framework
Endesa expressed concerns over the complex and uncertain regulatory environment for distribution network investments, which poses challenges to meeting decarbonization and electrification goals.
Impact of Ancillary Services Costs
The rise in ancillary services costs has been a significant challenge for Endesa, with an anticipated net negative impact of approximately EUR 150 million by the end of the year.
Customer Base Reduction
Endesa experienced a reduction in its customer base, losing 130,000 regulated customers in Q3, highlighting the competitive nature of the market.
Forward-Looking Guidance
Looking ahead, Endesa provided optimistic guidance for fiscal year 2025, emphasizing strong financial metrics despite market uncertainties. The company aims to continue its strategic initiatives, including further acquisitions and partnerships, while maintaining its share buyback program. Endesa remains committed to achieving the upper range of its financial forecasts, focusing on resilience and shareholder value.
In summary, Endesa’s earnings call showcased a strong financial performance and strategic advancements, though it also acknowledged challenges within the regulatory framework and rising costs. The sentiment remains cautiously optimistic, with the company poised to continue its growth trajectory while navigating regulatory uncertainties.