ENDESA 2002 Consolidated Results.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 26, 2003 ENDESA (NYSE NYSE See: New York Stock Exchange :ELE ELE equine leukoencephalomalacia. )-- NET INCOME FOR THE YEAR 2002 WAS EURO euro: see European Monetary System. euro Single currency of 15 countries of the European Union (EU), including Germany, France, and Italy. It is also the official currency in several areas outside the EU. 1,270 MILLION, AND EARNINGS PER SHARE EURO 1.20, BOTH WITH A DECREASE OF 14.1% OVER 2001, DUE TO THE COMPANY'S DECISION TO MAKE WRITE DOWNS AND PROVISIONS TO STRENGTHEN THE BALANCE-SHEET
-- OTHER RELEVANT MAGNITUDES THAT REGISTERED SIGNIFICANT CHANGES
WERE:
-- CASH FLOW OF EURO 4,285 MILLIONS, AN INCREASE OF 28% VS
2001.
-- OPERATING INCOME AMOUNTED TO EURO 3,582 MILLION, 12.8%
HIGHER THAN 2001.
-- ORDINARY INCOME WAS EURO 1,500 MILLION, INCREASING BY
43.4%.
-- Earnings per share evolved in line with net income, amounting
to Euro 1.2, representing a 14.1% decrease against 2001.
-- ENDESA's Board of Directors will submit a proposal to the
Annual Shareholders Meeting to pay the same dividend against
2002 results than the one paid against 2001.
-- Extraordinary provisions and write-downs have been made to
cover future risks for an amount of Euro 1,169 million, with
an impact in net income of Euro 802 million.
-- 2002 net income before write-downs and provisions amounted to
Euro 2,072 million, a 40.1% increase from 2001.
-- Domestic electricity business operating income amounted to
Euro 2,131 million. This represents an 18.5% increase against
2001.
-- Latin American operating income was Euro 1,268 million,
representing 35.4% of the total operating income.
-- This amount represents a 10.9% decrease against 2001 caused by
the exceptional currency devaluation taken place in the main
Latin American countries. Measured in local currency, Latin
American operating income grew by 25.2%, confirming its
profitability potential.
-- Operating income for the electricity business in European
countries other than Spain, which corresponds entirely to the
activity carried out by ENDESA Italia, amounted to Euro 150
million, a 25% more than the effect of the sale of Viesgo.
-- In telecommunications, AUNA EBITDA was positive amounting to
Euro 610 million. Net income of AMENA, its main subsidiary,
was Euro 101 million. The foreseeable future performance of
the parent company and the asset sale in process will make
unnecessary new equity contributions from the shareholders
-- In 2002 ENDESA reduced its debt by Euro 2,260 million, 9%
against year 2001. Excluding the new debt consolidated from
Endesa Italia, debt reduction was Euro 3,590 million.
-- Average cost of debt for the year ending 2002 improved
significantly to 5.05%, against 5.85% for 2001.
-- Debt reduction and the decrease in the average cost of debt
have enabled a reduction in net financial expenses of Euro 222
million, a decrease of 15.2% against 2001.
-- Debt reduction was especially relevant in the domestic
business amounting to Euro 2,374 million with an average cost
of debt of 4.3%, vs 4.6% in 2001.
-- The company's total investments in 2002 amounted to Euro 3,963
million, down 27.2% from 2001. Excluding the financing of the
deficit of revenues from regulated activities, investments
were reduced by 40.2%.
-- In accordance with the 2002-2006 Strategic Plan, the
remarkable investment control above mentioned, did not affect
the capital expenditures in the Electricity business in Spain,
which amounted to Euro 1,350 million, +11.5% from 2001.
ENDESA's (NYSE:ELE) net income for the year 2002 was Euro 1,270 million and earnings per share were Euro 1.20, both with a decrease of 14.1% over 2001. The lower results are due to the company's decision to make write downs and provisions in the amount of Euro 1,169 million in order to cover future risks, which have had an impact on net income of Euro 802 million. This provisioning effort against 2002 results considerably strengthens ENDESA's balance sheet covering the risks that might materialise Verb 1. materialise - come into being; become reality; "Her dream really materialized" materialize, happen hap, happen, occur, come about, take place, go on, pass off, fall out, pass - come to pass; "What is happening?"; "The meeting took place off without in the next few years, yielding a more solid position to address the future. Net income before the above write-downs and provisions for future risks amounted to Euro 2,072 million, 40.1% higher than 2001. This increase is due in part for the new regulation contained in the Royal Decree decree, in law, decision of a suit in a court of equity. It is the counterpart in equity of the judgment in a court of law, although in those jurisdictions where law and equity have merged, judgment is sometimes used to include both. 1432/2002 costs liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of the regulated reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. activities. Cash flow for 2002 amounted to Euro 4,285 million, Euro 938 million or 28%, higher than in 2001. The increase in cash flow is in line with the increase in net income before write-downs and provisions for future risks. ENDESA's different lines of business have generally shown a very positive performance in 2002, as evidenced by a 43.4% increase in ordinary income to Euro 1,500 million. This positive evolution has been made possible by both a 12.8% higher operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. to Euro 3,582 million and by lower financial expenses. Domestic electricity business delivered 59.5% of the total operating income, amounting to Euro 2,131 million. This represents an 18.5% increase against 2001, which would have been 26.9% on a like for like basis discounting the effect of the sale of VIESGO. This increase was obtained mainly as a result of a 3.2% increase in the energy generated by ENDESA in an homogeneous The same. Contrast with heterogeneous. homogeneous - (Or "homogenous") Of uniform nature, similar in kind. 1. In the context of distributed systems, middleware makes heterogeneous systems appear as a homogeneous entity. For example see: interoperable network. basis and through the higher wholesale generation prices in 2002, more than compensating the higher fuel costs derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from lower hydro hy·dro adj. Hydroelectric. n. pl. hy·dros 1. Hydroelectric power. 2. A hydroelectric power plant. levels in 2002 against 2001. Royal Decree 1432/2002 establishes the companies' right to recover on a lineal That which comes in a line, particularly a direct line, as from parent to child or grandparent to grandchild. LINEAL. That which comes in a line. Lineal consanguinity is that which subsists between persons, one of whom is descended in a direct line from the other. basis, over the period 2003-2010, the amount of the tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. for regulated activities including the corresponding interest. The 2002 financial statements fully reflect the revenues from generation, supply, distribution and transmission in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the price setting systems in force, deregulated in the first two cases and regulated in the latter two. ENDESA accounted Euro 658 million as account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. to reflect the right to recover the revenue shortfall of the regulated activities. Of this amount, Euro 524 million correspond to the 2002 shortfall and the balance of Euro 134 million to the previous years, including their corresponding interests. It is important to highlight that previous years amount, deducted de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. from revenues in year 2000, has been accounted in year 2002 as "Extraordinary Results". In addition to this, Royal Decree 1432/2002 recognises the right to recover, in the same way and in the same period as the revenue shortfall, the additional compensations for the extra costs in extra peninsular pen·in·su·la n. Abbr. Pen. A piece of land that projects into a body of water and is connected with the mainland by an isthmus. [Latin paen systems. Therefore, ENDESA has accounted Euro 128 million as extraordinary income for 2002 corresponding to the compensations recognised for previous years. The above Royal Decree has allowed the normalisation 1. (data processing) normalisation - A transformation applied uniformly to each element in a set of data so that the set has some specific statistical property. For example, monthly measurements of the rainfall in London might be normalised by dividing each one by the total of the remuneration REMUNERATION. Reward; recompense; salary. Dig. 17, 1, 7. to the Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. electricity industry by making sure that all of the agents receive the remuneration to which they are legally entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: for the activities carried out in 2002 and previous years. As for the business in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , their performance has been positive in general in all of the countries in which ENDESA's subsidiaries operate, with a 25.2% rise in operating income in local currency terms. Even in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. , despite the country's crisis in 2002, the whole of the operating income from ENDESA's subsidiaries rose 27.0% in Argentinean peso terms. Nevertheless the currency devaluation Currency devaluation A deliberate downward adjustment in the official exchange rates established, or pegged, by a government against a specified standard, such as another currency or gold. in the countries where ENDESA's subsidiaries operate together with the Euro's strength, have resulted in a 10.9% decrease in operating income for the region to Euro 1,268 million against 2001, that represented 35.4% of the company's total. Given deep economic crisis that Latin America has gone through in 2002 and the strong currency devaluation in he area, this decrease in the operating income of the Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of operations should be considered as moderate. This proves that even in extraordinary adverse circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , this business has a clear potential for growth and return. As for ENDESA's European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. electricity business, operating income rose 25% to Euro 150 million, more than offsetting the effect of the sale of Viesgo. On the other hand, ENDESA reduced its debt levels in Euro 2,260 million in 2002 to a total Euro 22,747 million as of 31December December: see month. 2002. Average cost of debt for 2002 showed a significant decrease to 5.05%, against 5.85% in 2001. In particular, it is worth mentioning that the cost of debt for the domestic business decreased to 4.3% from 4.6% in 2001. The drop in debt and its average cost enabled Euro 222 million lower net financial expenses in 2002, a 15.2% decrease against 2001. The lower financial expenses have allowed absorbing ab·sorb tr.v. ab·sorbed, ab·sorb·ing, ab·sorbs 1. To take (something) in through or as through pores or interstices. 2. To occupy the full attention, interest, or time of; engross. the effect of the foreign exchange differences derived from the Latin American currency devaluation, with an improvement of Euro 88 million in the financial results for the year against 2001. As a summary, 2002 showed a very positive performance of the ordinary income and cash flow mainly due to the Spanish electricity business. In addition to this, ENDESA made a great effort through provisioning and write-downs in order to strengthen the company's balance sheet, allowing ENDESA to address the future from a more solid position. It is also remarkable the significant reduction in debt levels. Dividend ENDESA Board of Directors will submit a proposal to the Annual Shareholders Meeting to pay the same dividend against the 2002 results, than the one paid against 2001. Therefore, total dividend proposed would amount to Euro 0.6825 per share. On January January: see month. 2nd 2003, an interim dividend of Euro 0.264 per share was paid, therefore final dividend would be Euro 0.4185 per share. This final dividend would be payable on July July: see month. 1st 2003. This dividend proposal against 2002 results means a 56.9% pay-out ratio, which is similar to other European utilities. CHANGES IN THE CONSOLIDATION PERIMETER The boundary of a system or network, which defines the inside and outside. It is typically determined by firewalls and addresses. See DMZ. The main changes in the consolidation perimeter that took place in the year have been due to the following: -- The result of the operations in the year resulted in a reduction of the debt of Euro 1,366 million, as is detailed in item 6 "Cash Flow, Investments and Financing." -- The consolidation perimeter changes added Euro 1,330 million corresponding to ENDESA Italia's debt position as of 31 December 2001 as well as the reduction of Euro 152 million of the debt at that date from the companies that ceased to be fully consolidated mainly VIESGO. -- The changes in the exchange rates against the Euro of the currencies in which the consolidated affiliates hold their debt have resulted in a decrease of the Euro value of the total consolidated debt of Euro 2,072 million. ANALYSIS OF RESULTS The table below shows the main magnitudes of ENDESA's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: profit and loss account for 2002 and their comparison against 2001.
Main magnitudes of ENDESA's profit and loss account
(Euro million)
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2002 2001 % var.
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Revenues 16,739 15,576 7.5
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EBITDA 5,278 5,004 5.5
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Cash flow 4,285 3,347 28.0
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Operating income 3,582 3,175 12.8
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Ordinary income 1,500 1,046 43.4
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Net income 1,270 1,479 -14.1
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1 Operating income ENDESA's revenues in 2002 amounted to Euro 16,739 million, a 7.5% rise on the previous year. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become was Euro 5,278 million, an increase of 5.5% over the previous year. Operating income for the year 2002 was Euro 3,582 million, an increase of 12.8% against the previous year. The table below shows a breakdown breakdown /break·down/ (brak´doun) 1. the act or process of ceasing to function. 2. an often sudden collapse in health. 3. loss of self-control. of revenues, EBITDA operating income among the different markets and lines of business in which ENDESA operate.
Electricity
Domestic Europe Latin America Other
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Euro % on Euro % on Euro % on Euro % on
million total million total million total million total
----------------------------------------------------------------------
Revenues 10,885 65.0 1,744 10.4 3,850 23.0 260 1.6
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EBITDA 3,205 60.7 263 5.0 1,735 32.9 75 1.4
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Operating
Income 2,131 59.5 150 4.2 1,268 35.4 33 0.9
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Cash flow 2.537 59.2 179 4.2 1.444 33.7 125 2.9
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1.1 Domestic electricity business Operating income for the domestic electricity business in 2002 was Euro 2,131 million, an increase of Euro 332 million in absolute and of 18.5% in relative terms against 2001. For a homogeneous comparison between the operating income for 2001 and 2002 it is necessary to consider the sale of Viesgo, which contributed Euro 120 million to the operating income in 2001, whereby, on a like for like basis, operating income increased by Euro 452 million, that is, 26.9% higher than 2001 without Viesgo. This higher operating income has been mainly due to the advantages provided by ENDESA's balanced generation mix under low hydro conditions such as in 2002, in which the company can increase its output and therefore its market share with lower fuel costs than the rest of the industry. Revenues Revenues from the domestic electricity business amounted to Euro 10,885 million in 2002, an increase of 7.9% against 2001. The table below shows a breakdown of revenues. In order to facilitate the analysis, figures for 2001 highlight the figures for Viesgo.
Euro million
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2002 2001 Change % chge.
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Sales 10,579 9,044 1,535 17.0
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CTC
-By technology 49 70 (21) -30.0
-Coal 41 67 (26) -38.8
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Services 216 251 (35) -13.9
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Viesgo - 654 (654) N/A
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TOTAL 10,885 10,086 799 7.9
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Sales Sales in 2002 were Euro 10,579 million, broken down as follows:
Euro million
----------------------------------------------------------------------
2002 2001 Change % chge.
----------------------------------------------------------------------
Generation, mainland 3,739 3,085 654 21.2
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Distribution and transmission,
mainland 4,306 3,713 593 16.0
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Supply 1,209 1,085 124 11.4
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"Trading" 121 173 (52) -30.1
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Extra peninsular systems* 872 845 27 3.2
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Extra peninsular compensations 204 126 78 61.9
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Other** 128 17 111 N/A
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TOTAL 10,579 9,044 1,535 17.0
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* For a higher transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. and due to the particularities of production and generation in the extra peninsular systems, the information on these activities is shown separately. ** Most of this amount corresponds to sales of gas in the Spanish liberalised market. Generation In 2002, demand for electricity in the mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. grew 2.1% against 2001. Still, the output from generators under the ordinary regime was only 0.8% higher, due to the 12.4% higher output from generators under the special regime and to the higher imports of electricity. ENDESA's generation sales in the mainland were 21.2% higher as a result of the following: -- The result of the operations in the year resulted in a reduction of the debt of Euro 1,366 million, as is detailed in item 6 "Cash Flow, Investments and Financing." -- The consolidation perimeter changes added Euro 1,330 million corresponding to ENDESA Italia's debt position as of 31 December 2001 as well as the reduction of Euro 152 million of the debt at that date from the companies that ceased to be fully consolidated mainly VIESGO. -- The changes in the exchange rates against the Euro of the currencies in which the consolidated affiliates hold their debt have resulted in a decrease of the Euro value of the total consolidated debt of Euro 2,072 million. The table below shows the structure of the generation in the mainland for both ENDESA and the whole of the industry for 2001 and 2002:
Structure of electricity generation in the mainland
for ENDESA and the total industry (%)
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ENDESA Total industry
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2002 2001 2002 2001
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Nuclear 36.3 34.4 33.8 34.5
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Coal 47.5 45.2 43.1 37.6
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Hydro 10.1 15.4 12.2 22.1
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Fuel-gas 3.9 5.0 7.9 5.8
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CCGT 2.2 - 3.0 -
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Total 100.0 100.0 100.0 100.0
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The table above shows that ENDESA's generation mix in the mainland is very stable, with low volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the to hydro conditions. This allows ENDESA to replace the hydro deficits with coal power plants, instead of fuel oil burning plants that result in much higher costs per kWh. On the other hand, is worth to point out that in the third quarter 2002 the CCGT CCGT Combined Cycle Gas Turbine CCGT Chicago Center for Green Technology CCGT Combined-Cycle Generating Technology CCGT catalytic combustion gas turbine plants at Besos (Barcelona Barcelona (bär'səlō`nə, Catalan bär'səlō`nə, Span. bär'thālō`nä), city (1990 pop. 4,738,354), capital of Barcelona prov. and chief city of Catalonia, NE Spain, on the Mediterranean Sea. ) and San Roque Most common meanings
Distribution and Transmission Energy sold by ENDESA in the mainland was 73,399 GWh in 2002, 3.4% lower than 2001, though it increases a 2.9% compared to 2001 after subtracting figures for Viesgo. This figure represents a share of 39.6% of distribution in the mainland. Revenues from distribution and transmission in the mainland grew by Euro 593 million. Of this amount Euro 561 million corresponded to the higher cost of energy purchases, mainly as a result from the higher pool prices. The regulated margin on distribution remains at similar levels as in the 2001. Disregarding dis·re·gard tr.v. dis·re·gard·ed, dis·re·gard·ing, dis·re·gards 1. To pay no attention or heed to; ignore. 2. To treat without proper respect or attentiveness. n. this effect, sales from distribution and transmission would have increased by Euro 32 million against 2001, a rise of 0.9%. Supply In 2002, ENDESA sold 22,797 GWh to eligible customers, an increase of 4.9% against 2001. Along the year 2002 ENDESA followed a pricing policy geared towards an improvement of margins, which led to a 6.3% increase in the price for energy, thereby leading to a 11.4% rise in revenues for the activity to Euro 1,209 million. ENDESA's share in the market for eligible customers has been 36.7% in 2002. Extra Peninsular Systems In 2002, ENDESA's output in the extra peninsular systems was 11,238 GWh, 3.7% higher than 2001. Sales in these markets were Euro 872 million, an increase of 3.2% against 2001. In addition to this, revenues include Euro 204 million from compensations, an increase of Euro 61.9 million against 2001, before the additional compensations established by Royal Decree 1.432/2002. In 2002 the 232 MW cycle power plant of Son Reus Reus (rĕ`  s), city (1990 pop. 86,407), Tarragona prov., NE Spain, in Catalonia. Since the introduction (18th cent. (Balearic Islands Balearic Islands (bălēăr`ĭk), Span. Baleares (bälāä`rās), archipelago, off Spain, in the W Mediterranean, forming Baleares prov. (1990 pop. )
started its commercial operations.Operating Costs operating costs npl → gastos mpl operacionales The table below shows operating costs for the domestic electricity business, separating the ones for Viesgo in 2001 for an easier comparison.
Euro million
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2002 2001 Change % chge.
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Purchases 6,426 5,489 937 17.1
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Purchases of energy 4,605 3,837 768 20.0
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Fuel 1,434 1,318 116 8.8
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Transmission and other
external expenses 387 334 53 15.9
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Depreciation 1,074 1,029 45 4.4
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Provisions (22) 23 (45) N/A
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Personnel 825 823 2 0.2
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Other Operating Costs 641 549 92 16.8
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Viesgo - 542 (542) N/A
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TOTAL 8,944 8,455 489 5.8
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Purchases In 2002, purchases were increased Euro 937 Million (17.1%) against 2001 mainly due to the following two reasons: -- The result of the operations in the year resulted in a reduction of the debt of Euro 1,366 million, as is detailed in item 6 "Cash Flow, Investments and Financing." -- The consolidation perimeter changes added Euro 1,330 million corresponding to ENDESA Italia's debt position as of 31 December 2001 as well as the reduction of Euro 152 million of the debt at that date from the companies that ceased to be fully consolidated mainly VIESGO. -- The changes in the exchange rates against the Euro of the currencies in which the consolidated affiliates hold their debt have resulted in a decrease of the Euro value of the total consolidated debt of Euro 2,072 million. Provisions Operating provisions for 2002 include the usual annual provision charges, the amount for 2002 being lower since Euro 56 million from the domestic coal consumption compensations for the first half 2000 were collected in 2002. The provision, which was created for this amount in 2000, has therefore been reversed. Personnel Expenses As of December 31st 2002 ENDESA's domestic electricity business workforce amounted 13,548 employees decreasing 1,468 against December 31st 2001, including 876 of VIESGO. Personnel expenses in 2002 were Euro 825 million, practically equal to 2001 after excluding personnel costs from VIESGO. 1.2. European Electricity Business Operating income for the electricity business in European countries other than Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. corresponds entirely to the activity carried out by ENDESA Italia. ENDESA's output in Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. in 2002 was 17,551 GWh with revenues of Euro 1,108 million. During 2002, ENDESA has continued to develop the improvements in efficiency as set out in the business plan. Total workforce at ENDESA Italia as of 31st December 2002 was 1,108, lower in 290 employees than at the end of the year 2001. EBITDA for 2002 was Euro 263 million, enabling an operating income of Euro 150 million. 1.3. Latin American Electricity Business Operating income for the Latin American electricity business in 2002 was Euro 1,268 million, a decrease of 10.9% against last year. However, should Argentina be disregarded dis·re·gard tr.v. dis·re·gard·ed, dis·re·gard·ing, dis·re·gards 1. To pay no attention or heed to; ignore. 2. To treat without proper respect or attentiveness. n. , operating income shows an increase of 3.8%. Between 2001 and 2002 local currencies experienced significant devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. against the Euro having a negative effect on the operating income measured in Euro. However, in local currency terms, operating income from the Latin American companies that are fully consolidated increased by 25.2%. The table below shows the performance of the EBITDA and operating income in Latin America broken down by activity:
Euro million
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EBITDA Operating income
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2002 2001 % chge. 2002 2001 %chge.
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Generation 858 968 -11.4 627 653 -4.0
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Distribution &
Transmission 911 1,115 -18.3 679 774 -12.3
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Other (34) 3 N/A (38) (4) N/A
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Total 1,735 2,086 -16.8 1,268 1,423 -10.9
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The table below shows EBITDA and operating income for the activities of generation and distribution in 2002 and 2001, broken down by country where ENDESA has fully consolidated affiliates.
Euro million
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EBITDA Operating Income
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2002 2001 % chge. 2002 2001 % chge.
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Generation
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Chile 375 362 3.6 281 256 9.8
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Colombia 179 193 -7.3 124 132 -6.1
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Brazil 50 70 -28.6 40 63 -36.5
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Peru 158 163 -3.1 118 121 -2.5
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TOTAL Generation ex
Argentina 762 788 -3.3 563 572 -1.6
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Argentina 96 180 -46.7 64 81 -20.9
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TOTAL Generation 858 968 -11.4 627 653 -4.0
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Distribution and Transmission
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Chile 194 208 -6.7 171 184 -7.1
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Colombia 133 149 -10.7 56 65 -13.8
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Brazil 413 314 31.5 343 228 50.4
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Peru 85 91 -6.6 55 62 -11.3
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TOTAL Dist. and Trans. ex
Argentina 825 762 8.3 625 539 16.0
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Argentina 86 353 -75.6 54 235 -77.0
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TOTAL Distribution &
Transmission 911 1,115 -18.3 679 774 -12.3
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In all the countries and activities that reflect lower EBITDA and operating income against 2001, their decreases have been lower than the devaluation of the local currency against the Euro, therefore the currency devaluation has been the reason behind the reduction of both magnitudes in Euro terms. It is worth noting that in Chile Chile (chĭl`ē, Span. chē`lā), officially Republic of Chile, republic (2005 est. pop. 15,981,000), 292,256 sq mi (756,945 sq km), S South America, west of the continental divide of the Andes Mts. , Colombia Colombia (kəlŭm`bēə, Span. kōlōm`byä), officially Republic of Colombia, republic (2005 est. pop. 42,954,000), 439,735 sq mi (1,138,914 sq km), NW South America. Bogotá is the capital and largest city. and Peru the drops have been much lower than the ones for their currency devaluation thereby evidencing the good business performance in local currency terms. On the other hand, the excellent performance of the Chilean generation should be highlighted, with an increase in Euro terms of its operating income of 9.8% despite the Chilean peso's 23,4% devaluation against the Euro in 2002, as well as distribution and transmission in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , where the higher operating income was mainly due to CIEN CIEN Ciena Corporation (stock symbol) , the company that interconnects Argentina and Brazil, whose second line was commissioned in 2002. Operating results for the Latin American electricity business of ENDESA in 2002, achieved in a very adverse economic environment, reflect the efficiency improvements that are being achieved in its subsidiaries and the limited impact from the situations of recession on the electricity business. The table below shows the physical data of ENDESA's Latin American subsidiaries in 2002 and 2001.
Generation (GWh) Distribution (GWh)
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% chge. % chge.
2002 s/2001 2002 s/2001
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Chile 16,285 3.5 9,895 3.9
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Colombia 10,699 5.0 9,029 4.1
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Argentina 8,600 -23.4 12,159 -6.0
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Brazil 2,467 9.3 12,653 4.6
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Peru 4,404 -2.3 3,872 5.1
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TOTAL 42,455 -3.3 47,608 1.5
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The data above show that ENDESA's Latin American business is adequately diversified diversified (di·verˑ·s , both by country and line of business, which enables it to face the consequences of the odd situations of recession. 2 Financial Results Financial results for 2002 were a net loss of Euro 1,634 million, an improvement of 5.1% against last year, as broken down below:
Euro million
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2002 2001 Change % chge.
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Financial expenses (1,499) (1,628) 129 7.9
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Financial income 260 167 93 55.7
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FX differences (549) (398) (151) -37.9
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Monetary correction 163 141 22 15.6
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Change in provisions (9) (4) (5) N/A
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Total financial results (1,634) (1,722) 88 5.1
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2.1 Financial Expenses In 2002 ENDESA reduced its debt figure by Euro 2,260 million. As a consequence of that, debt fell to Euro 22,747 million as of December 31st 2002. The reduction in debt was the result of the following: -- The result of the operations in the year resulted in a reduction of the debt of Euro 1,366 million, as is detailed in item 6 "Cash Flow, Investments and Financing." -- The consolidation perimeter changes added Euro 1,330 million corresponding to ENDESA Italia's debt position as of 31 December 2001 as well as the reduction of Euro 152 million of the debt at that date from the companies that ceased to be fully consolidated mainly VIESGO. -- The changes in the exchange rates against the Euro of the currencies in which the consolidated affiliates hold their debt have resulted in a decrease of the Euro value of the total consolidated debt of Euro 2,072 million. On the other hand, average cost of debt for the year was 5.05%, against 5.85% for 2001. This decrease and the debt reduction have enabled a reduction in net financial expenses of Euro 222 million, a decrease of 15.2% against 2001. The following table shows a breakdown of debt and its average cost by line of business in 2002:
Euro Million Debt as of Debt as of Change Avge
31-12-01 31-12-02 cost
2002
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Domestic electricity business 11,768 9,394 (2,374) 4.26
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Latin American electricity
business 11,525 9,599 (1,926) 6.25
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Enersis with third parties
debt 8.570 6.984 (1.586) 7,05
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Rest 2.955 2.615 (340) 4,17
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European electricity business - 1,627 1,627 3.83
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Other businesses 1,714 2,127 413 4.13
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TOTAL 25,007 22,747 (2,260) 5.05
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2.2. Foreign Exchange Differences Net foreign exchange differences for 2002 resulted in a net loss of Euro 549 million. Among the currencies of the countries where ENDESA operates, the most significant exchange rate fluctuation Fluctuation A price or interest rate change. against the Euro and US dollar has been the Argentinean peso. As of 31st December 2001 the exchange rate was 1 peso per dollar while as of 30th December 2002 was 3.37 pesos per dollar, meaning a devaluation of 70.3%. Since ENDESA closed its accounts for the year 2001 using an exchange rate of 1.7 pesos to the dollar, the effect on 2002 corresponds to a devaluation of 49.6%. Of the remaining currencies of the countries in which ENDESA has a presence, it is worth noting the 34.3% devaluation of the Brazilian real The real (IPA: [xe'aw] or [ʁe'aɫ], symbol: R$, ISO 4217 code: BRL, plural: reais) is the currency of Brazil. It is also the name of the earliest Brazilian currency (see from the Colonial period to 1942. against the dollar. In 2002 the negative effect of the devaluation of the Argentinean peso on the debt of the ENDESA's subsidiaries operating in this country amounted to Euro 392 million with an impact on net income of Euro 67 million. In the case of Brazil, most of the dollar-denominated third party debt in ENDESA's subsidiaries is hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. ; hence the impact from foreign exchange differences derived from this debt upon the results is not significant. 3 Equity Income In 2002, losses attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to ENDESA under the equity method were Euro 93 million. The largest component of the equity losses corresponds to the shareholdings in telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. affiliates. The telecommunications holding company AUNA AUNA Auditory Neuropathy, Autosomal Dominant 1 , showed a loss of Euro 160 million, which, apart from AUNA's ordinary income, includes some the provisions corresponding to the closing of Quiero TV and other write downs. In 2002 AUNA showed positive EBITDA of Euro 610 million and its main subsidiary, AMENA AMENA Address Mark Enable after Synchronization , posted a positive net income of Euro 101 million with a customer base of 6,460,000, and an income market share of 18.6%. On the other hand, the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future performance of the parent company and the asset sale in process will make unnecessary new equity contributions from the shareholders. It is important to highlight that the foreseeable future performance of the holding and divestments will make it unnecessary to ask for new equity contributions from the shareholders. The Chilean mobile telephone operator Smartcom An earlier family of communications programs for PCs and Macs from Hayes. Versions emulated several terminals and supported a variety of protocols, including the Hayes V-series. , despite showing net loss of Euro 53 million, had EBITDA positive of Euro 8.6 millions for the year, due to 42% revenues increase compared to 2001. Moreover, as of 31st December 2002 it had a customer base of 946,000, 55% higher than a year ago, and a market share of 15.5%, against 12.6% in 2001. Following prudence criteria criteria (krītēr´ē  ),n. , ENDESA has deferred the effect from the fiscal deductibility of the telecom participations, for the amount of Euro 152 million, which will cover the future fiscal cost arisen when these participations show benefits. 4 Extraordinary Results Extraordinary results for ENDESA in 2002 were Euro 71 million. Its main components were the following:
-- The Euro 1,066 million capital gain from the sale of 87.5% of
VIESGO.
-- The recognition of the tariff deficit and additional
compensations corresponding to previous years over costs in
the extra peninsular systems for the amount of Euro 86 and 128
million, respectively.
-- A Euro 317 million extraordinary amortisation of Smartcom
goodwill as a result of the value decrease in the sector of
telecommunications.
-- Euro 380 million provisions to cover the risks related to the
national electricity business. This corresponds to the
shortening of the useful life of assets caused by the
liberalisation of the market, the new regulation on meters and
the update of the actuarial studies for the pension
commitments with the workforce as a consequence of higher
inflation than the previously assumed.
-- Euro 404 million provisions to cover risks related to the
Latin American electricity business, where 134 millions were
already allocated in the first nine months of the year. This
provision covers possible assets and goodwill capital losses
in Latin America and future risks due to other contingencies
in ENDESA's subsidiaries and in operations conducted by ENDESA
in Latin America.
Among these provisions it is noteworthy the Euro 145 million
provision to fully cover the risks of the investments,
including intercompany loans granted to Argentinean
subsidiaries, regarding the uncertainty of the economic
situation of the country.
With this provision, the book value of ENDESA's net assets in
Argentina is zero.
-- A provision to cover the effect of the lower share price on
the treasury stock, which amounted to Euro 75 million.
5 Information by Line of Business The table shown below shows the main parameters of the income statement and balance sheet as of December 31, 2002 by line of business:
Euro Million
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Revenues Operating Net Fixed
Income Income Assets
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Generation 4.345 1.364 2.082 8.316
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Distribution 5.597 684 498 6.729
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Supply 1.323 98 38 10
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Latin America 3.850 1.268 (281) 9.286
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Europe 1.744 150 21 2.349
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Other businesses 260 33 (496) 505
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Services 254 6 27 59
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Corporate
Structure 211 (27) (619) 154
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Adjustments among
activities (845) 6 - 333
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TOTAL 16.739 3.582 1.270 27.741
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The net result by activities includes the effect of the Ministerio de Hacienda hacienda also called estancia (Argentina and Uruguay) or fazenda (Brazil) In Latin America, a large landed estate. The hacienda originated in the colonial period and survived into the 20th century. official reply to ENDESA's inquiry, regarding the company of the ENDESA Group to which the early retirement programs tax credit should be applied. As a result of this inquiry, the anticipated tax has been reallocated among the different companies of the Group, with no effect at a consolidated level. The main effects have been a negative Euro 541 million in the Holding Company and Euro 272 million and Euro 246 million in Generation and Distribution respectively. The balance of the positive effect basically corresponds to services for an amount of Euro 20 million. 6 Cash Flow, Investments and Financing Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses amounted to Euro 4,285 million during 2002, a 28% increase over 2001. This cash flow allowed covering capital expenditures and intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. which amounted to Euro 2,470 million, payment of the dividend to ENDESA's shareholder in the amount of Euro 723 and to minorities in the amount of Euro 116 million as well as payment of previously provisioned commitments, such as pensions and payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. reductions, in the amount of Euro 440 million, which includes the externalisation n. 1. embodying in an outward form. Noun 1. externalisation - attributing to outside causes externalization ascription, attribution - assigning to a cause or source; "the attribution of lighting to an expression of God's wrath"; "he of the pension fund materialised in 2002. In 2002, funds from asset disposals amounted to Euro 1,889 million, of which Euro 1,684 million correspond to the sale of 87.5% of Viesgo. In addition, in December 2002, an advance payment of Euro 485 million was received from Red Electrica de Espana (REE) for the sale of the mainland transmission network that will be made in 2003. On the other hand, financial investments amounted to Euro 1,493 million, including the tariff deficit in Spain corresponding to the regulated business and the extra peninsular systems amounting to Euro 706 million to be cashed in more than one year time, thereby accounted as financial investment. Other financial investments include capital increases subscribed Subscribed Newly issued securities that an investor has agree to, or stated his intent to, buy in a public offering prior to the issue date. When an investor uses rights, he expects to own the designated number of shares they have subscribed to once the offering is completed. in AUNA and Smartcom for Euro 273 and 57 million respectively, and the acquisition to Telecom Italia Telecom Italia is formerly a partially state-owned Italian telco. It was once known as SIP, and it has the largest user base in Italy. Telecom Italia also owns shares in Telecom Argentina and Telecom Personal, fixed and cellular networks in Argentina. of an additional 2% of AUNA for Euro 159 million. The acquisition of shares in consolidated companies corresponds in its entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. to the acquisition of the additional 5.7% in ENDESA Italia, already mentioned. The breakdown of total investments in the period 2002 and its comparison with 2001 is as follows:
Euro Million
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Change
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2002 2001 Amount %
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Capital Expenditures 2,372 2,403 (31) (1.3)
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Intangibles 98 141 (43) (30.5)
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Financial 1,366 2,890 (1,524) (52.7)
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Tariff deficit financing
and islands compensations 706 ---- 706 N/A
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Other financial
investments 660 2,890 (2,230) (77.2)
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Acquisition of shares in
consolidated companies 127 12 (115) N/A
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Total investments 3,963 5,446 (1,483) (27.2)
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Total investments without
regulated activities deficit 3,257 5,446 (2,189) (40.2)
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Following the investment control strategy carried out by ENDESA towards leverage reduction contemplated in it Strategic Plan 2002-2006, 2002 total investment decreased by 40.2% against 2001, excluding the tariff deficit financing deficit financing In government, the practice of spending more money than is received as revenue, the difference being made up by borrowing or minting new funds. The term usually refers to a conscious attempt to stimulate the economy by lowering tax rates or increasing and the extrapeninsular compensations. Even including this deficit, total investment decreased by 27.2%. The breakdown of capital expenditures by line of business is as follows:
Euro Million
Electricity business
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Spain Latin Europe Other Total
America Business
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Generation 604 276 241 - 1,121
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Distribution 658 402(*) - - 1,060
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Others 88 32 4 67 191
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Total 1,350 710 245 67 2,372
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* Including the investment in the second transmission line between Brazil-Argentina. It is important to highlight, that in accordance with the 2002-2006 Strategic Plan, the remarkable investment control above mentioned, did not affect the capital expenditures in the Electricity business in Spain. Particularly the capital expenditures in the distribution business in Spain amounted to Euro 658 million, or 48.7% of the capital expenditure carried out by ENDESA in the electricity business in Spain and a 11.3% increase against 2001. On the other hand, generation capital expenditures in Spain amounted to Euro 604 million, mainly in the deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of new combined cycle A combined cycle is characteristic of a power producing engine or plant that employs more than one thermodynamic cycle. Heat engines are only able to use a portion of the energy their fuel generates (usually less than 50%). The remaining heat from combustion is generally wasted. power plants. Financing activity wise, in 2002 ENDESA made long term financing transactions for an amount of Euro 2,048 million and an average life of 5.6 Years. Additionally, in February February: see month. 2003, Euro 700 million bond was issued under ENDESA's Euro Medium Term Notes (MTN's) program maturing in 10 years and closed a "Club Deal" with 14 banks in the amount of Euro1.5 billion maturing in 2008, and a bilateral bilateral /bi·lat·er·al/ (-lat´er-al) having two sides, or pertaining to both sides. bi·lat·er·al adj. 1. Having or formed of two sides; two-sided. 2. loan of Euro 50 million maturing in 2009. As of today, there are credit lines available for an amount of Euro 2,514 million approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. and cash investments for Euro 1,060 million. For additional information, please contact Jacinto Jacinto is a Spanish and Portuguese name meaning Hyacinth, which can refer to Saint Hyacinth, a Roman martyr (Hyacinth and Protus), or the flower itself. See also
The process by which the corporation communicates with its investors. Office, Tel: (212) 750 7200. http://www.endesa.es |
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