Edison ends 2014 with revenues holding steady at 12.3 billion euros and EBITDA of 814 million euros, up compared with 2013, net of the nonrecurring effect of gas renegotiations.
Debt decreases to 1.8 billion euros, down by 0.7 billion.
Milan, February 12, 2015 – Edison’s Board of Directors reviewed yesterday the annual financial statements for the year ended December 31, 2014, which show improved operating results compared with 2013, net of the nonrecurring effect of the renegotiations of gas contracts, which had impacts of different amounts in each of the two years.
The availability of abundant water resources during the year, growing electric power sales to end customers and the important contribution provided by the hydrocarbon exploration and production activities drove the Group’s performance in the year just ended, despite a particularly challenging environment, in terms both of economic fundamentals and demand for electric power and gas.
HIGHLIGHTS OF THE EDISON GROUP
| in millions of euros | 2014 | 2013[1] | Δ % |
|---|---|---|---|
| Sales revenues | 12,325 | 12,304 | 0.2 |
| EBITDA | 814 [2] | 970 | (16.1) |
| EBIT | 292 | 321 | (9.0) |
| Profit (Loss) before taxes | 214 | 217 | (1.4) |
| Group interest in net profit (loss) | 40 | 96 | (58.3) |
[1] Further to the adoption of the IFRS 11 accounting principle, joint ventures, previously consolidated by the proportional method, were valued by the equity method. The data for 2013 were restated accordingly, in order to provide a comparison between homogeneous data. The amounts published in 2013 were 12,335 million euros for sales revenues, 1,009 million euros for EBITDA and 96 million euros for net profit.
[2] Net of the nonrecurring impact of the renegotiation of gas contracts for the component attributable to previous years, EBITDA show an increase of more than 100 million euros compared with 2013.
Operating Performance of the Group at December 31, 2014
The year 2014 was characterized by a further contraction in the demand for electric power and gas, matched by a downward trend in sales prices.
More specifically, Italian demand for electric power decreased to 309 TWh, or 3% less than in 2013, falling to the level of 2005. The reduction weighed exclusively on thermoelectric production (-10%) due to the availability of plentiful water resources during the year, the structural growth of renewable-source capacity and an increase in net imports. The TWA PUN [2] settled at 52.1 euros per MWh, for a decline of 17.3% compared with 2013.
Consumption of natural gas was also down sharply in Italy in 2014, falling to 61.4 billion cubic meters, for a reduction of 11.6% compared with 2013. Such a low level of demand had not been recorded since1998. Unusually mild winter weather in the first and last quarter of the year, which curtailed consumption by residential customers, and a reduction in demand for electric power, which, combined with the year’s abundance of water resources, depressed consumption by thermoelectric users, accounts for this decrease. In 2014, gas prices in Italy contracted by 17.2% compared with the previous year, falling to 244.8 euros/000 smc [3].
Despite such a highly challenging reference scenario, Edison ended 2014 with stable sales revenues of 12,325 million euros (12,304 million euros in 2013). A positive performance by the electric power operations (+9.7% to 7,859 million euros), which reported an increase in sales volumes, partly offset the impact of a decrease in revenues by the hydrocarbons operations (-13.8% to 5,168 million euros), caused by a decline in average sales prices and lower sales volumes of gas.
EBITDA totaled 814 million euros compared with 970 million euros reported in 2013. Both amounts reflect the one-off impact, attributable to previous years, of the agreements for the revision of long-term contracts to import gas from Algeria and Qatar (signed in 2013) and Russia (signed in 2014). Net of this effect, EBITDA for 2014 show a gain of more than 100 million euros compared with the previous year.
More in detail, the adjusted EBITDA [4] of the electric power operations increased by 3.6% to 690 million euros (666 million euros in 2013), despite a particularly challenging market environment, with demand for electric power and prices falling to steadily declining levels on a year-over-year basis. Nevertheless, the results of the electric power operations were boosted by higher sales to end customer, the availability of plentiful water resource and the optimization of the power generating facilities portfolio. The adjusted EBITDA [4] of the hydrocarbons operations were 255 million euros, down from 415 million euros in 2013. These amounts reflect the above mentioned one-off impact of the price review agreements for the long-term contracts to import gas signed with its suppliers. The hydrocarbons operations
benefited from a significant contribution by E&P, storage activities and a limited upturn in the performance of the gas supply and sales activities, which, however, continued to be characterized by strong pressure on sales margins. To address this situation, Edison has begun with its gas suppliers the price review process for its long-term gas procurement contracts. It is currently in the process of completing the second cycle of renegotiations for the contract with ENI for gas from Libya, having already successfully completed the revisions of the contracts for gas from Algeria, Qatar and Russia.
EBIT totaled 292 million euros (321 million euros in 2013), reflecting the impact of the reduction in EBITDA and market conditions that produced a decrease in prices of energy and brent having two opposite effects: on the one hand writedowns for 239 million euros, on the other hand the positive effect of the fair value related to commodity hedges for 250 million euros.
The profit before taxes was 214 million euros (217 million euros in 2013), as a result of the above trends balanced by a decrease in net financial expense and transaction-related foreign exchange gains.
Edison ended 2014 with a net profit of 40 million euros (96 million euros the previous year), penalized by a particularly high tax burden caused by the non-tax deductibility of the goodwill impairment. Without this effect the tax rate would have amounted to 42%, which benefits from the tax realignment of some assets done during the year.
Net financial debt continued to improve, falling to 1,766 million euros compared with 2,451 million euros at the end of 2013. The net financial debt reported at the end of the year benefited from the effect of the transaction executed in the renewable energy sector and from the positive change in operating working capital.
As for indebtedness maturing over the next 18 months, note that the fixed-rate bonds issued in 2010 for a total face value of 500 million euros will mature on March 17, 2015 without generating any financial discomfort for the Company, given its projected liquidity.
Guidance
The 2015 EBITDA are expected to be at least 1 billion euros. This guidance takes into account the impact of the arbitration with Eni for the long-term gas procurement contract from Libya, the effects of the drop in oil prices and of the implementation of the actions taken by the company to reduce operating costs.
Results of the Group’s Parent Company
Edison Spa, the Group’s Parent Company, ended the year with a net loss of 37 million euros, from a net profit of 78 million euros reported the previous year. The result was affected by the continuing downward trend that has impacted the Italian economy since 2008 with effects on national demand of electric power and gas. Consequently, the Board of Directors will recommend that the Shareholders’ Meeting replenish the loss using available reserves.
Report on Corporate Governance and Compensation Report
The Board of Directors approved the 2014 Report on Corporate Governance and on the Company’s Ownership Structure, which is an integral part of the financial statement documents, and the annual Compensation Report.
Notice of Shareholders’ Meeting
The Board of Directors resolved to convene a Shareholders’ Meeting for March 26, 2015. The items on the Meeting’s Agenda include the approval of the 2014 Financial Statements, replenishment of the loss using available reserves, the determination of the Directors’ number and the appointment of the Board of Directors’ Chairman. The Agenda of the meeting includes also the consultation on the Compensation Report’s “First Section”.
Notice of the Special Meeting of Savings Shareholders
The Board of Directors further resolved to convene a Special Meeting of Savings Shareholders for March 30, 2015 (on the first calling), March 31, 2015 (on the second calling) and April 1, 2015 (on the third calling), to elect the Joint Representative.
[2] Time-Weighted Average for the Single National Price (abbreviated as PUN in Italian).
[3] Annual average price recorded at the Virtual Exchange Facility – VEF (abbreviated as PSV in Italian).
[4] Adjusted EBITDA reflect the effect of the reclassification from the Hydrocarbons Operations to the Electric Power Operations of the portion of the results of commodity and foreign exchange hedges executed in connection with contracts to import natural gas attributable to the Electric Power Operations. This reclassification is being made to provide a consistent operational presentation of industrial results. Adjusted EBITDA include central staff and technical services.
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Edison’s External Relations Department
Andrea Prandi
External Relations Director
02 6222 7331
Elena Distaso
Head of Media Relations
02 6222 8522
Lucia Caltagirone
02 6222 8283
Florian Ciornei
02 6222 8124
Investor Relations Edison:
02 62228415 - investor.relations@edison.it
As required by Article 154-bis, Section 2, of the Uniform Finance Code (Legislative Decree No. 58/1998), Didier Calvez and Roberto Buccelli, in their capacity as “Dirigenti Preposti alla redazione dei documenti contabili societari” of Edison S.p.A., attest that the accounting information contained in this press release is consistent with the data in the Company’s documents, books of accounts and other accounting records. The 2014 Financial Statements were the subject of a statutory independent audit and the Report on Operations and the Report on Corporate Governance were reviewed by the Independent Auditors.
This press release and, specifically, the section entitled “Business Outlook” contains forward-looking statements. These statements are based on the Group’s current projections and expectations with regard to future events, which, by their very nature, are subject to an intrinsic component of risk and uncertainty. Actual results could be materially different from those contained in the abovementioned statements due to a number of factors, including continued volatility and a deterioration of the capital and financial markets, fluctuations in raw material prices, changes in macroeconomic conditions and economic growth rates and other changes in business conditions, changes in the statutory and regulatory framework and institutional scenario (both in Italy and abroad), and many other factors, most of which are beyond the Group’s control.
The Group’s income statement, showing the other components of the comprehensive income statement, balance sheet, cash flow statement and the statement of changes in consolidated shareholders’ equity are annexed to this press release.
Public disclosure required by Consob Resolution No. 11971 of May 14, 1999, as amended.