Edison ends the first quarter with revenues of 3.1 billion euros, EBITDA down to 51 million euros and net financial debt down to 1.6 billion euros. 2015 guidance confirmed

Rome, May 8, 2015 – Edison’s Board of Directors, meeting yesterday, reviewed the Quarterly Report at March 31, 2015 and updated the budget in light of the slide in the price of oil and an exhaustive spending review implemented by the Company to reduce operating costs, confirming the guidance for the full year.

HIGHLIGHTS Of THE EDISON GROUP

HIGHLIGHTS Of THE EDISON GROUP

[1] The data for 2014 were restated due to immaterial reclassifictions.

 

 

Operating Performance of the Group at March 31, 2015

In the first quarter of 2015, demand for electric power held relatively steady compared with the same period last year, while consumption of natural gas staged a strong rebound going back to normal weather conditions, even though prices followed a downward trend.

More specifically, Italian demand for electric power totaled 78.1 TWh (-0.1% compared with 78.2 TWh in the same period in 2014), with a sharp reduction in hydroelectric production, due to a lower availability of water resources during the period, compared with the first quarter of 2014, offset by a recovery in thermoelectric production (+4%) and an increase in the output from renewable-sources.

Consumption of natural gas increased by 10.6% to 23.7 billion cubic meters (21.4 billion cubic meters in the same period last year), thanks to a pickup in demand for gas from residential customers — due to lower temperatures compared with the unusually mild weather experienced in the first quarter of 2014 — and thermoelectric power plants, due to the significant reduction in hydroelectric production. On the procurement side, there was a significant increase in the volumes drawn from the stored gas inventory in the first three months of the year (+50% compared with the same period last year).

In this scenario, Edison ended the first quarter of the year with sales revenues of 3,147 million euros, down from 3,478 million euros in the same period in 2014, due to a reduction in average sales prices, driven by the scenario. The effect of this decline was particularly pronounced for the electric power operations, which reported a decrease in revenues to 1,703 million euros, while the hydrocarbons operations were able to offset the effect of lower sales prices with an increase in sales volumes, contributing 1,676 million euros to total revenues.

EBITDA decreased to 51 million euros, compared with 216 million euros in the first quarter of 2014, when the volume of available water resources reached an all-time high, boosting the margins of the electric power operations. More in detail, the adjusted EBITDA of the electric power operations fell to 109 million euros (188 million euros in the first quarter of 2014) due to a contraction of sales margins, caused by a reduction in sales prices, and a lower availability of water resources compared with the exceptional levels recorded in the first quarter of last year. Renewable energy sources provided a positive contribution, thanks also to a broader scope of activity. The adjusted EBITDA of the hydrocarbons operations were negative by 37 million euros (49 million euros first quarter of 2014), due mainly to the results of the gas sales activities, which continue to heavily suffer the non-alignment between the cost of gas purchased through long-term procurement contracts and the market prices. The second round of renegotiations – started at the end of 2012 – is still awaiting the conclusion of the arbitration with Eni for Libyan gas, which is now expected in the second half of the year versus a previous expectation for first half of 2015. The result of hydrocarbons operations registers also the slump in oil price with an impact on the E&P contribution.

EBIT were negative by 119 million euros (+218 million euros in the first quarter of last year). This result reflects the impact of the reduction in margins mentioned above, an increase in depreciation and amortization related to exploration costs, mainly in Norway and the U.K., and the negative effect of the fair value measurement of commodity hedging positions, which was particularly positive in the first quarter of 2014 (-13 million euros compared with +134 million euros in the first quarter of 2014).

The result before taxes was negative by 90 million euros (+190 million euros in the first quarter of 2014), due to the effects of the dynamics described above, partially offset by net financial income of 31 million euros (-32 million euros in the first quarter of 2014) mainly consisting of foreign exchange gains.

Edison ended the first quarter of 2015 with a net loss of 153 million euros (+101 million euros in the first three months of 2014). The loss also reflects the effects of the ruling of unconstitutionality of the Robin Hood Tax, which had a negative nonrecurring impact of 68 million euros, mitigated in part by the reduction in the tax rate resulting from the abovementioned ruling starting from 2015.

Net financial debt improved to 1,603 million euros at March 31, 2014 from 1,766 million euros at the end of 2014. In the context of improved investments, particularly in the E&P area, the decrease is mainly due to the favorable trend in working capital.

In March the company relied upon its available sources of funds to reimburse an expiring 500 million euro bond, issued in 2010.

 

Outlook

The latest projections confirm EBITDA expectations of at least 1 billion euros for 2015, taking into account the effects of the decline in oil prices and the benefit of programs implemented by the Company to reduce operating costs as well as the impact of the arbitration with Eni regarding the contract for the supply of gas from Libya expected now in the second half of the year versus a previous expectation for first half of 2015.

 

Key Events in the First Quarter of 2015

January 13 – Edison executed a put&call option to acquire from Apache Beryl I (a subsidiary of Apache Corporation) its interests in the Scott and Telford oil fields (10.5% and 15.7%, respectively) located in the P185 15/22 concession in the British North Sea.

 

Significant Events Occurring Since March 31, 2015

April 15 – The Ministry of the Environment and the Protection of the Territory and the Sea, in concert with the Ministry of Cultural Assets and Activities and Tourism, greenlighted Edison’s project to optimize the recovery of hydrocarbons from the Rospo Mare offshore field by means of four new wells and an upgrade of the equipment currently installed on the Rospo Mare B platform. The Rospo Mare offshore field, which is in production since 1982 and includes three oil platforms (Rospo Mare A-B-C) and a storage vessel, is located in the Adriatic Sea opposite the coast of the Abruzzo and Molise regions, about 20 km east of the town of Vasto. The field is managed by Edison, as operator at 62%, in a joint venture with Eni at 38%.

April 16 – The Ministry of the Environment and the Protection of the Territory and the Sea, in concert with the Ministry of Cultural Assets and Activities and Tourism, greenlighted Edison’s Vega B project to fully realize the value of the Vega oil field, which Edison manages since 1987 as operator at 60%, in a joint venture with Eni at 40%. This project, which in accordance with the concession’s original development plan will include the construction of a satellite platform with four wells (VegaB) connected with the existing oil platform, will generate important benefits for the local community in term of investments, jobs and ancillary economic activity.

April 30 – Edison closed the transaction mentioned above acquiring from Apache Beryl I its interests in the Scott and Telford oil fields (10.5% and 15.7%, respectively), thereby increasing its reserves by 8.7 million barrels of oil equivalent (85% oil and 15% gas). Thanks to this transaction, Edison’s total production in the United Kingdom will increase to about 6,500 barrels of oil equivalent a day, bringing Edison’s total production to 53,000 barrels of oil equivalent a day.

Pertinent Documents

The Quarterly report at March 31, 2015 of the Edison Group, approved by the Board of Directors of Edison Spa, will be available by May 11 at the Company’s head office, on the websites of Borsa Italiana Spa (www.borsaitaliana.it) and Edison Spa (www.edison.it) and on the authorized storage mechanism “NIS-Storage” (www.emarketstorage.com).

 

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Edison’s External Relations Department

Andrea Prandi
External Relations Director
02 62227331

Elena Distaso
Head of Media Relations
02 62228522

Lucia Caltagirone
Media Relations
02 62228283

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 Quarterly Report at March 31, 2015 was not audited.

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, the outcome of the arbitration proceedings for the gas procurement contracts, 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.

 

Quarterly Report at March 31, 2015