The company will meet the challenge presented by inflation and higher financial costs by redefining its priorities: Investment in networks is linked to the new regulatory parameters, and there will be partners to collaborate in the development of renewable projects.
Endesa's activities guided by three strategic pillars: Profitability, flexibility and resilience with a view to defining the destination of the investment, operational efficiency, with more cost control and maximisation of cash generation and financial and environmental sustainability.
By 2026, expected net ordinary income will be 2,200-2,300 million, with an EBITDA of 5,600-5,900 million, and a dividend of 1.5 euros in that year. The payout ratio of 70% has been extended for one more year and there will be a guaranteed minimum dividend of 1 euro for the entire plan.
- Endesa has updated its strategy for the 2024-2026 triennium, at a time of rising financial costs and inflation, with a continuity plan compared to the previous one. Gross investment will amount to 8,900 million, in line with the previous plan. Distribution networks and renewable generation, two of the pillars of clean electrification, remain as key axes.
- The main financial objectives are to achieve an EBITDA of between 5,600 and 5,900 million by 2026, which would generate an ordinary net profit of between 2,200 million and 2,300 million for the same year.
- The dividend policy will also be maintained and updated: A 70% payout is extended for another year, to 2026. And a parallel guaranteed minimum dividend of 1 euro per share will offered during the triennium. This is expected to reach 1.5 euros per share by 2026, which would represent a dividend yield of 8%.
- The company's activities over the next three years will take into account a possible deceleration in electrification as a result of higher financial costs and inflation, while the regulatory context still needs to be clarified in the Distribution business and in non-mainland territories. All of this has resulted in a re-evaluation of the growth strategy.
- For 2024-2026, the three strategic pillars that have resulted from this process are as follows: Firstly, profitability and flexibility when deciding the destination of investments based on an external partners model for renewable development. Secondly, the efficiency and effectiveness of operations, with greater cost control and maximisation of cash generation. Thirdly, financial and environmental sustainability.
- The investment amounting to 8,900 million is distributed as follows: 2,800 million gross for distribution networks, an increase of 200 million compared to the previous plan pending greater visibility on the regulatory review; a further 4,300 million for renewables, the same figure as in the previous plan, with a greater preponderance for wind power to reach a renewable capacity of 13,900 MW by the end of 2026 and with Andorra, Pego and the 800MW wind power in Galicia as featured projects; and 900 million for the customer area to reach 7.5 million in the free market in the Iberian Peninsula by the end of the three-year period, while the commercial strategy focusses on the electrification of all energy uses.
- Endesa still aims to achieve full decarbonisation by 2040, which would make it a Net Zero company, with the abandoning of coal in the islands business as an intermediate milestone in 2027. All this following the closure of the last coal-fired power plant in mainland Spain, As Pontes, in 2023. 93% of Endesa's mainland production will be emission-free by 2026, up from 79% at the end of this year.
- The company's key objective is to promote clean electrification with about 90% of the energy sold to fixed-price customers originating from non-emitting sources by 2026, up from 76% this year. The integrated unit margin for the deregulated electricity business will remain stable during the period.
- In the gas business, margins are expected to recover after the exceptionally negative results in 2023, while the customer portfolio will remain stable at 1.8 million, of which 1.4 million are in the free market. A decrease in the use of gas to produce electricity in combined cycle power plants is expected as a result of the progressive normalisation of this generation technology.
- The ratio of net financial debt to EBITDA will be 1.4 in 2026, down from 2 in 2022 and with an estimate of 2.1 by 2025 in the previous plan. The percentage of debt linked to sustainability criteria will exceed 80% by the end of the plan, from 64% in 2023. By the end of 2026, Endesa will have a net financial debt of between 8,000 and 9,000 million, between 10%-20% less than at the end of this year.
Today Endesa presented to the investment community an update on its strategic plan for 2024-2026, within a context of higher financial costs and inflation that may affect the pace of the electrification of the economy. This situation, together with the necessary visibility on critical regulatory issues at national and European level, have obliged the company to refocus its pillars and strategies for growth.
For 2024-2026, the three strategic axes that emerged from this re-evaluation process are as follows: firstly, profitability and flexibility, with the external partners model and asset rotation already un progress, when deciding the destination of investments. Secondly, operational efficiency and effectiveness of operations, with greater cost control and maximisation of cash generation. Thirdly, financial and environmental sustainability.
All of this is fully compatible with the path towards the decarbonisation of the company's generation mix, while focusing the offer to domestic and business customers on value-added services and the supply of electricity from non-emitting sources.
After taking all this into account, Endesa has set a target for 2026 to achieve an EBITDA of between 5,600 and 5,900 million, an ordinary net profit of 2,200-2,300 million, a net financial debt of 8,000-9,000 million and a dividend of 1.5 euros (which would represent a dividend yield of 8%), with a guaranteed minimum of 1 euro/share during the three years of the plan.
The total investment envisaged in the new strategy for the Iberian Peninsula remains in line with the 2023-2025 plan, amounting to 8,900 million. The amount allocated to Networks in this plan (2,000 million net) is conditional on greater visibility over the 2026-2031 regulatory period with regard to the remuneration from investment in networks.
Investment in renewables remains stable at 4,300 million, to reach 13,900MW of renewable power by the end of the plan, representing 93% of emission-free production on the Mainland. A greater commitment to wind power, which will total 1,600MW (compared to 2,000MW for solar), while wind and hydroelectric repowering projects are the main new features compared to the previous plan.
The three star projects in this field are the fair transition projects in Andorra (Teruel), Pego (Portugal) and Galicia. The first two represent an investment of 1,700 million and 700 million respectively, and will be operational in 2026-2027 and 2026. The third is a series of wind farms totalling 800MW and an investment of about 1,000 million to be operational by 2025. These are financially sustainable energy transition projects, in which the aim is to provide job opportunities for employees affected by activities that cease to be operational by supporting the personnel with training and developing the local economy with new sustainable economic activities for the future.
Endesa confirms that it will totally abandon coal in Spain by 2027, with the end of operations in Alcudia, which is currently being maintained for reasons of security of supply, and following the closure of its largest coal-fired power plant (As Pontes) this year. The company reconfirms that it will be fully decarbonised by 2040, when it will have fully abandoned the gas business. The aim of all this is to comply with the Paris Agreement goal of 1.5ºC of temperature increase compared to the pre-industrial era.
José Bogas, Chief Executive Officer of Endesa, told investors during the presentation of the plan: "This new, more selective investment strategy optimises our vertically integrated business model, while maintaining the flexibility to take advantage of future opportunities. Networks and Renewables, key axes of the energy transition, are essential to increase Europe's energy independence, security of supply and to achieve affordable energy. A strong cash flow is the basis for meeting the demands of the transition while consolidating financial strength. All this is also aimed at offering an attractive and sustainable dividend policy".
Sales strategy
The creation of a clean energy mix supported by a more efficient, resilient and digitalised grid, together with an investment of 900 million until 2026 aimed at customers, will be Endesa's lever to provide valuable services and a good customer experience with a view to promoting loyalty.
With the basic strategy of increasing the electrification of our customers, we will use the knowledge we have of their needs as the basis to offer users more sophisticated and high-value products. The portfolio of deregulated-market contracts in Spain and Portugal will increase to 7.5 million at the end of the period (7.1 million at the end of 2023), which will enable the total volume of liberalised fixed-price electricity sales to grow to 53 TWh (terawatt hours).
The company's key objective is to promote clean electrification with about 90% of the energy sold to fixed-price customers originating from non-emitting sources by 2026, up from 76% this year. The integrated unit margin for the deregulated electricity business will remain stable during the period.
In the gas business, margins are expected to recover after an exceptional 2023 that is severely affected by market volatility, while the customer portfolio will remain stable at 1.8 million, of which 1.4 million are in the free market. A sharp decline is expected in the use of gas to produce electricity in combined cycle power plants.
With regard to the financial performance expected for the next three years, the Chief Economic and Financial Officer, Marco Palermo, outlined the basis for the growth of results and the reduction of debt. EBITDA will reach an estimated 5,600-5,900 million, an increase of 31% compared to 2023, due to the fact that all businesses make a positive contribution supported by the expected normalisation of the market and progress in the regulatory sphere. Net ordinary income has increased to 2,200-2,300 million, mainly due to solid developments in the EBITDA, to which we should add lower financial burdens, fiscal normalisation after the termination of the extraordinary tax regime and an increase in payments to minority shareholders as a result of the strategy of enabling the entry of partners into shared projects.
With regard to net debt, during the period it is expected to add a further 8,000 million in net investments and 4,000 million in dividend payments to liabilities of between 10,000 million and 11,000 million at the end of 2023; items which will be offset by 11,000 million in cash flow and 3,000 million from the contribution of partners and asset rotation, in accordance with the new collaboration model ("partnership model"). As a result of this, net debt will amount to 8,000-9,000 million by 2026, 10%-20% less than at the end of 2023. The ratio of net financial debt to EBITDA will be 1.4 in 2026, up from 2.3 estimated at the end of this year. The percentage of debt linked to sustainable criteria will exceed 80% by the end of the plan (64% in 2023).
About Endesa
Endesa is a leading electricity company in Spain and the second largest in Portugal. The company is also the second largest gas operator in the Spanish market. It undertakes end-to-end business including the generation, distribution and retailing of electricity. It also offers, through Endesa X, value-added services aimed at the electrification of energy uses in homes, companies, industries and Public Administrations, including electric mobility, where it is one of the main operators of charging stations in Spain. Endesa is firmly committed to the United Nations SDGs and strongly supports the development of renewable energies through Enel Green Power España, the digitalisation of grids through e-distribución and Corporate Social Responsibility (CSR). The Endesa Foundation is also active in CSR. Our workforce numbers around 9,260 employees. Endesa is a division of Enel, Europe's largest electricity group.
