Edison reports major gains in revenues and operating results; net profit to 531 million euros

Edison’s Board of Directors Reviews the Quarterly Report at September 30, 2006

EDISON REPORTS MAJOR GAINS IN REVENUES AND OPERATING RESULTS; NET PROFIT TO 531 MILLION EUROS

Net indebtedness down thanks to positive cash flow from operations

Milan, November 8, 2006 – Edison’s Board of Directors met today at the Company’s Foro Buonaparte headquarters to review the Quarterly Report at September 30, 2006.
In the third quarter of 2006, Edison continued to grow its businesses, particularly in the deregulated electric power market. In this area, consolidated unit sales were up about 46%, due mainly to the full availability of new, combined-cycle power plants in Candela, Altomonte and Piacenza (Edipower), which are both ecocompatible and highly efficient and the startup of the Torviscosa plant. Such growth, coupled with the positive impact of renegotiated prices for certain long-term gas supply contract (discussed in detail in the Semiannual Report), enabled the Group to report sharply higher industrial results than in the third quarter of 2005. Quarterly revenues rose to 1,965 million euros from 1,476 million (+33.1%), EBITDA improved to 445 million euros from 338 million (+31.7%) and EBIT increased to 279 million euros from 200 million (+39.5%).

The cumulative data for the first nine months of 2006 show that the Group is continuing to report significant improvements in all performance indicators: sales revenues were up by more than 32% to 6,231 million euros (4,701 million euros in the same period last year, when revenues from Tecnimont’s engineering operations were included in the scope of consolidation), EBITDA grew by about 30% to 1,219 million euros (935 million euros in the first nine months of 2005) and EBIT increased by more than 33% to 694 million euros (520 million euros in the first nine months of 2005). Net profit rose almost 55% to 531 million euros (343 million euros in the first nine months of 2005), owing in part to non-recurring items that were discussed in greater detail in the Semiannual Report.

Sales Volumes and Revenues
During the first nine months of 2006, sales revenues were up a strong 32.5% compared with the same period last year (the increase is 39% when the data are restated on a comparable scope of consolidation basis), rising from 4,701 million euros in 2005 to 6,231 million euros this year. The electric power operations and the hydrocarbons operations grew by 45.5% and 32.9%, respectively.
Both businesses benefited from significantly higher average sales prices, due mainly to an increase in raw material prices in the international markets. The electric power operations reported a sharp gain in unit sales, which were up 23.3% to 47,611 GWh (38,620 GWh in 2005). This improvement was made possible by Edison’s ability to use the additional capacity provided by its new power plants to increase its share of the deregulated market (sales were up 43.1%) and reflects the success of the marketing policies pursued by the Group.
The supply of natural gas available to the Group increased to 9,993 million cubic meters (+3.0%). Sales to own thermoelectric power plants, which reflected the start of production at new facilities, increased by 17.6% to 6,116 million cubic meters (5.202 million cubic meters in the first nine months of 2005). At the same time, sales of natural gas to residential users decreased from 2,705 million cubic meters in the first nine months of 2005 to 2,484 million cubic meters this year, as demand was curtailed by a reduction in the supply of natural gas caused by the so-called natural gas emergency.

EBITDA
EBITDA grew by 30.4%, rising from 935 million euros in the first nine months of 2005 to 1,219 million euros in the same period this year. Data for the third quarter of the year show an increase of 31.7% (445 million euros versus 338 million euros). The electric power operations reported a gain of 171 million euros in the first nine months of 2006 (+23.7%). This improvement reflect mainly a rise in revenues in the deregulated market. It’s worth reminding that, in keeping with a conservative accounting approach, the Group did not recognize expected refunds for costs incurred in connection with the natural gas emergency, since the Electric Power and Natural Gas Authority has not yet defined the refund criteria.
Even though unit sales growth was hampered by the limited availability of natural gas, the hydrocarbons operations reported higher EBITDA (+109 million euros, or 42.1%, compared with the first nine months of 2005) thanks to the successful renegotiation of the natural gas price it pays under long-term contracts. The higher value of hydrocarbons produced in Italy and abroad, which was made possible by a favorable trend in the benchmark oil markets, also helped increase profitability.

EBIT
EBIT totaled 694 million euros at September 30, 2006, compared with 520 million euros in the first nine months of 2005 (+33.5%). In the third quarter of 2006, EBIT were up 39.5%, rising from 200 million euros to 279 million euros. The increase in profitability was reduced in part by a rise in depreciation, compared with the first nine months of 2005.

Net Profit
The Group’s interest in net profit at September 30, 2006 rose to 531 million euros, or 54.8% more than the 343 million euros earned in the first nine months of 2005. It’s worth mentioning that both periods’ bottom line benefited of nonrecurring gains: in first nine months of 2005, 63 million euros generated by the settlement of certain legal disputes and the sale of AEM Spa shares; lower tax burden related to loss carryforward still available in 2005 was also registered. In the first nine months of 2006, as already described in the Semiannual Report, a net tax benefit of 202 million euros was obtained by realigning the tax-base amounts of a significant portion of Edison’s production facilities to the corresponding higher reporting values, as allowed under Law No. 266 of December 23, 2005. On a like-for-like basis net profit increased more than 50%.

Indebtedness
At September 30, 2006, the Group’s net borrowings totaled 4,575 million euros, down from 4,820 million euros at December 31, 2005, thanks to the positive cash flow from operations. As a result, the debt/equity ratio improved and was 0.68 (0.73 at September 30, 2005).

Outlook for the Balance of 2006
The positive trend that characterized the first nine months of 2006 points to continued success in the closing quarter of the year. Results for the full year should be significantly better than those reported in 2005. This forecast does not take into consideration the gain that the sale of Edison Rete Spa to Terna Spa is expected to generate, as announced this past October 16, if the antitrust authorities should approve the operation before the end of the year.

Conference Call
The Group’s operating results for the first nine months of 2006 will be discussed today at 4:30 PM (3:30 PM GMT) during a conference call. Journalists may follow the presentation by telephone in listen-only mode by dialing 800 985564 toll free in Italy or +44 (0) 1452 562249 outside Italy.
The presentation will also be available at the Group’s website: www.edison.it
 

Edison’s Press Office: Tel. +39 02 62227331, ufficiostampa@edison.it
Edison’s Investor Relations: Tel. +39 02 62228415, investor.relations@edison.it
www.edison.it

The Quarterly Report at September 30, 2006 will be available upon request at the Company’s headquarters (31 Foro Buonaparte, Milan) and at the offices of Borsa Italiana Spa by November 14, 2006. It may also be consulted at the Group’s website: www.edison.it