EDISON: Revenues up to 2,966 million euros (+8.2%) thanks to the sales increase in the electric power sector, EBITDA down (-43%) due to the lack of profitability of long-term gas procurement contracts.

Investments of 104 million euros to grow in the renewable sources sector and strengthen E&P and storage activities.

In the first quarter of 2011, demand was up slightly for electric power (+1.1% compared with the same period in 2010), but reduced by 2.6% for natural gas, as consumption by residential customers decreased due to an unusually mild winter. Overall, demand for electric power and natural gas was still well below pre-crisis level, showing that the period of unsettled market conditions that began in 2008, is still lasting.

The negative effects of weaker demand were magnified by a strong increase in Brent prices (+36% to USD 105.20 per barrel), which caused a significant growth in the costs of natural gas purchased under long-term procurement contracts.

In the electric power sector, the trend registered in fuel procurement transactions contributed to an increase in the time-weighted average of the PUN (single national price), which grew to 66.50 euros/MWh, or 5.6% more than in the first three months of 2010. However, it is important to keep in mind that the differential between peak-hour prices (down 1% to 76.7 euros/MWh) and “empty-hour” prices (up 9% to 61.6 euros/MWh) narrowed considerably during the first quarter.

In this scenario, Edison ended the first quarter of 2011 with revenues up 8.2% to 2,966 million euros, thanks to a strong performance by the Electric Power Operations (+7.8% compared with the first quarter of 2010) and a positive contribution by the Hydrocarbons Operations (+0.5% compared with the same period last year).

The growth in sales reported by the Electric Power Operations was driven by an increase in average sales prices, for the reasons explained above, and by an upturn in volumes sold in the deregulated market (+7.7%), particularly to wholesaler customers (+74%). The revenues reported by the hydrocarbons Operations benefited from the positive results generated by upstream activities in Egypt and from the trend of Brent prices, which offset the impact of a reduction in national demand for natural gas.

EBITDA totaled 183 million euros, or 43% less than the 321 million euros earned in the first quarter of 2010. The main reason for this decrease in profitability is a reduction in the adjusted EBITDA of the Hydrocarbons Operations (-78.4% to 27 million euro from 125 million euros in the first quarter of 2010). This decline in margins is entirely due to the natural gas trading activity, which has been negative over the past quarter because of the deterioration of margins on gas purchased under long-term procurement contracts. The gas sales margins have remained negative because of the oversupply in the Italian market as well as in the European one, which produced an high level of competition on the sales side, and also because of the demand weakness and the widening of the gap between spot prices and those under long term procurement contracts.The impact of lower margins was offset only in part by the positive effect of the renegotiation of long-term contracts to purchase natural gas in Norway, by a good performance by the hydrocarbon exploration and production activities at the Egyptian concessions and finally by a positive contribution by the natural gas storage and distribution activities.

The drop in the adjusted EBITDA of the Electric Power Operations was lower (-18.6% to 180 million euro from 221 million euros in the first quarter of 2010). Good results in the hydroelectric sector, the growing contribution provided by the international activities, (following the commissioning of the Thisvi thermoelectric power plant in Greece), and by the renewable resource activities  (which now include the San Francesco wind farm in the Calabria Region), offset in part the absence of CIP 6/92 subsidies, due to the early termination, at the end of 2010, of the CIP 6/92 contracts for the Jesi, Milazzo, Porcari and Porto Viro power plants and the expiration of the incentivized period for the Bussi and San Quirico power plants.

EBIT totaled 26 million euros, down from 149 million euros in 2010 (-82.6%) as consequence of the reduction in margins explained above and a lower amortization (15 million euro), resulting from the early termination of CIP 6/92 contracts and the writedowns recognized in 2010. The result before taxes was a loss of 13 million euros, as against a profit of 131 million euros in 2010, that reflects the combined impact of a reduction in EBIT and an increase in net financial expense (42 million euros in the first three months of 2011 compared with 25 million euros in the same period last year), caused mainly by net currency translation losses incurred in connection with gas purchases on long term contracts.

The Group reported a net loss of 20 million euros (net profit 67 million euros in the first quarter in 2010). Factors with an impact on the bottom line, in addition to the reduction in industrial margins discussed above, include a lower depreciation, and the increase in net financial expense (17 million euro) commented above, coupled with a lower tax rate (8 million euro in first quarter 2011 from 63 million euro in the same period of 2010) due to a decrease in results.

At March 31,2011, net financial debt totaled 4.054 million euros compared with 3.708 million euros at December 31, 2010. The debt/equity ratio is 0.5 (0.46 at December 31, 2010).

In the first quarter of 2011, the Group’s investments totaled 104 million euros. They were used primarily to strengthen the E&P activities focusing on the Abu Qir fields and to increase the storage capacity (for a total amount of 62 million euros), as well as to expand generating capacity from renewable sources (22 million euros), by upgrading the S. Giorgio (Bn) wind farm and expanding the Foiano (Bn) wind farm, by developing photovoltaic power plants in Oviglio (AL) and Cascine Bianche (AL) with a total capacity of about 4 MW and also by renewing some other hydroelectric plants.

Outlook for 2011

As announced to the market on March 14, 2011, EBITDA projected for 2011 is about 900 million euro. The reduction of profitability will remain until negotiations and arbitration proceedings for the long-term gas contracts reach a positive conclusion. The Company’s objective is to secure in the current and in the next few years both reasonable margins on its gas contracts and lump-sum compensation payments for the previous years.

Key Events of the First Quarter of 2011

January 19, 2011 – Edison is awarded three new hydrocarbon exploration licenses in Norway

February 11, 2011 – Edison successfully completes price renegotiations with ENI for the long-term contract to supply natural gas from Norway, obtaining significant cost savings compared with the price previously in effect.

 
Indipendence Requirements
The Board of Directors on the basis of the declarations released by the Directors Mario Cocchi, Gregorio Gitti and Gian Maria Gros-Pietro ascertained that those Directors have the requirements of independence as required by art. 148, comma 3 of D.Lgs. 58/1998 as well as by the Italian Stock Exchange corporate governance code.

The Board of Directors, with reference to the independence requirement set by law and Edison’s Corporate Governance Code, also ascertained the absence of commercial, financial or professional relationships existing or existed during the last financial year, directly or indirectly among those Directors and the Company, and also the non-existence of additional salary on top of the fixed remuneration during the last three financial years for the above mentioned Directors.

Conference Cal
The results presented in the interim report on operations at March 31, 2011 will be reviewed today at 06:30 PM (05:30 PM GMT) during a conference call. Journalists may follow the presentation by telephone, in listen-only mode, by dialing +39 02,80,58,827, The presentation will also be available on the Company website: www.edison.it.

Pertinent Documents
The interim report on operations at March 31, 2011 of the Edison Group, approved today by the Board of Directors of Edison Spa, will be available to the public on May 11, 2011 at the Company’s head office and on the websites of Borsa Italiana Spa (www.borsaitaliana.it) and Edison Spa (www.edison.it).