2005 Results 2006-2010 Plan London, 23 March 2006 0
Agenda 2005 Results Luigi Ferraris 2006-2010 plan Market Francesco Starace Generation & Energy Management Sandro Fontecedro Infrastructure & Network Livio Gallo International Activities Fulvio Conti Strategy and Targets Fulvio Conti Questions & Answers Annexes 1
Agenda 2005 Results Luigi Ferraris 2006-2010 plan Market Francesco Starace Generation & Energy Management Sandro Fontecedro Infrastructure & Network Livio Gallo International Activities Fulvio Conti Strategy and Targets Fulvio Conti Questions & Answers Annexes 2
2005 Results Operational data: Italian generation market Generation & import (TWh) 2004 2005 % Total demand 325.4 329.4 1.3% Total net production (1) 290.0 289.7-0.1% Enel net production 125.9 112.1-10.9% Others net production 164.2 177.6 8.2% Total import 45.6 49.2 7.7% Source: Terna (1) Including pumped storage 3
2005 Results Operational data: Italian electricity market demand Electricity sales (1) (TWh) 2004 2005 % Total market sales 304.5 308.4 1.3% Enel sales 157.8 148.2-6.1% Others sales 146.7 160.2 9.2% Electricity distribution (TWh) 2004 2005 % Enel 250.7 251.0 0.2% (1) Net of losses on the grid 4
2005 Results Operational data: Italian gas market Gas sales (1) 2004 2005 % Total consumption (bcm) 50.8 52.3 3.0% Enel sales (bcm) 5.2 5.1-1.9% Enel gas customers (thousands) 1,966 2,143 9.0% (1) Excluding thermal generation 5
2005 Results Operational data: Enel s international activities Generation 2004 2005 % Net installed capacity (MW) 3,693 3,786 2.5% Net production (GWh) 12,321 13,625 10.6% Distribution and sales 2004 2005 % Electricity sales (GWh) 4,459 8,093 81.5% Electricity distribution (GWh) 4,952 9,651 94.9% Customers (thousands) 611 2,070 238.8% 6
2005 Results Financial highlights mn 2004 2005 % Revenues (1) 31,011 34,059 9.8% Ebitda (2) 8,071 7,745-4.0% Ebitda net of stranded costs 7,003 7,745 10.6% Group net income 2,631 3,895 48.0% of which net ordinary income (3) 1,862 2,742 47.3% Net debt 24,514 12,312-49.8% Excellent financial performance (1) Including effect of Single Buyer s activities following the launch of the pool on April 1, 2004 (2) Both 2004 and 2005 EBITDA are reported net of capital gains on Terna disposal (3) Net of extraordinary items 7
2005 Results EBITDA (1) evolution ( mn) Services & Holding (2) 7,003 206 438 207 98 7,745 304 Network & (3) Sales 3,530 3,737 Generation & Energy Mgmt (4) 3,267 3,705 2004 Generation & Energy Mgmt Network & Sales Services & Holding (2) 2005 Profitability steadily growing in all business areas (1) 2004 EBITDA net of 2000-2003 stranded costs (2) Including intercompany adjustments (3) Of which international: 192 mn in 2005 vs 77 mn in 2004 (4) Of which international: 290 mn in 2005 vs 215 mn in 2004 8
2005 Results Net debt evolution ( mn) Down 12.2bn 2004 Wind Terna Cash flow from operations Capex Extraordinary activities Net financial charges Taxes Dividends 2005-3,257 +5,118-863 -1,815-3,472-12,312 +8,065-24,514 +8,426 Strong operational cash-flow and extraordinary items 9
2005 Results Dividend ( c/share) +22% 36 44 Paid in 2005 2006 A sound and high-yield investment 10
Agenda 2005 Results Luigi Ferraris 2006-2010 plan Market Francesco Starace Generation & Energy Management Sandro Fontecedro Infrastructure & Network Livio Gallo International Activities Fulvio Conti Strategy and Targets Fulvio Conti Questions & Answers Annexes 11
Market 2004-2010 free electricity market evolution (TWh) 325 329 342 306 363 82 Key competition drivers Full market opening in 2007 Captive market 170 156 226 152 130 New power generation Value-added services offered by retailers Free market 127 135 Potential free market 169 237 Launch of a structured forward market Self consumption Losses on the grid (6.4%) 21 21 21 21 21 21 22 23 2004 2005 2007 2010 Strong potential for growth in the eligible market 12
Market Domestic electricity market in 2005 Electricity consumption (1) (TWh) Number of customers (mn) 287 34.6 Free Market 0.283 Free Market 135 48% Eligible Market 7.3 Eligible Market Captive Market 90 62 52% Captive Market 27 ~22% Self consumption Losses on the grid 21 21 Self consumption Losses on the grid N/A N/A Strong potential for growth in SME and SOHO (1) The figure of 287TWh does not include self-consumption and losses on the grid 13
Market 2005-2010 domestic gas (1) market evolution (bcm) Other uses 52.3 52.6 1.7 1.8 54.2 1.8 Residential market 30.1 28.8 29.3 Industrial market 20.5 22.0 23.1 Other consumption 2 2 3 2005 2007 2010 High penetration of gas distribution in Italy (1) Excluding thermal generation. Totals do not include the item other consumption 14
Market Enel s position in 2005 52.3 Gas Electricity (free market) 135 283 Total market Enel Electricity (captive market) 152 17.0 130 34.3 29.8 5.1 2.1 18 39 Volumes (bmc) Customers (mn) Volumes (TWh) Customers (thousands) Volumes (TWh) Customers (mn) Enel is the 2nd operator in terms of volumes Enel is the 1st operator in terms of CAGR 2004-05 Positive marketing test on dual energy offer: 30% acquisitions Enel is the 1st operator in terms of volumes Slight volume increase over the last three years Potential strong increase in eligible retail market Potential eligible market available is equal to 90TWh Positive impact of new tariffs launch in terms of Enel brand image: ~ 640,000 subscriptions Dual energy offer as a tool for growth 15
Market Enel s targets in 2010 Gas (bcm) Electricity free market (TWh) Electricity captive market (TWh) Expected market share: 14% Expected market share: 34% Expected market share: 81% 7.5 retail & large energy intensive 81 130 108 5.1 5.8 2005 2007 2010 66 30 18 17 8 10 13 15 2005 2007 2010 64 2005 2007 2010 Selection of market segment consistent with strategy in power market Dual energy offer sustains customer retention Strong increase in SME and residential market Reduced sales to Single Buyer Excellence in quality service Volume decline in line with Enel s increase on the free market Focus on increasing share on the free market Hedging production margins 16
Market Enel s domestic targets in 2010: electricity free market (TWh) 81 retail & large energy intensive 30 18 17 8 10 13 2005 2007 2010 19 41 6 15 Residential Micro & medium businesses Large businesses Energy intensive Strong penetration in SME and residential segments Targeting 12mn customers 17
Agenda 2005 Results Luigi Ferraris 2006-2010 plan Market Francesco Starace Generation & Energy Management Sandro Fontecedro Infrastructure & Network Livio Gallo International Activities Fulvio Conti Strategy and Targets Fulvio Conti Questions & Answers Annexes 18
Generation & Energy Management Fuel price scenario 62 Brent ($/bbl) 45 57 4Q2005 Jan-Feb 2006 Coal (1) ($/ton) Long-term (2010) 58 50 52 4Q2005 Jan-Feb 2006 Long-term (2010) (1) CIF ARA (Rotterdam) 19
Generation & Energy Management Market scenario Additional capacity (1) CCGT Greenfield (GW) Additional capacity (1) CCGT Repowered (GW) Operating 4.8 Operating 3.8 5.7 9.5 Under construction 7.1 Under construction 0.8 1.6 2.4 Already authorised (on hold) 8.1 Construction about to start 0.4 Enel Others Italian price driven by new gas-fired CCGT (oil&gas price sensitive) (1) Additional capacity since 2003. Current market scenario 20
Generation & Energy Management Market scenario Continental power price vs IPEX ( /MWh) 68 IPEX 66 44 25 Average Powernext, EEX Price convergence April 2004 September 2004 February 2005 July 2005 December 2005 Spread between Italian and continental price is decreasing Less than expected increase in import in spite of 1.3GW of San Fiorano-Robbia line already operating New opportunities coming from export 21
Generation & Energy Management CO 2 Emission Trading Scheme CO 2 = 20 /ton 35 15 Effects on variable costs (1) ( /MWh) 57 7 50 CO 2 = 40 /ton 51 31 64 14 50 CO 2 Fuel cost 20 20 Coal CCGT Coal CCGT Actions undertaken to develop competitive CO 2 sourcing Carbon funds: participation in ICECAP already finalised; negotiations in progress for ICF and SCF Direct development of JI/CDM projects leveraging on renewables competences Direct purchasing in large projects and in countries with large CDM potential Biomass co-combustion in coal facilities Coal remains competitive (1) At current fuel costs 22
Generation & Energy Management Re-powering plan Enel s Production Mix 45% 29% 26% c1% 20% Oil & Gas ST/OCGT Gas CCGT 9% 22% 19% 20% 25% 27% 50% Coal 24% 27% 27% 30% Renewables 2002 2004 2005 Target Highly efficient CCGTs 10 in operation 2 under construction Coal re-powering Torre Nord under construction Porto Tolle regional EIA (1) obtained national EIA (1) submitted (1) Environmental Impact Assessment 23
Generation & Energy Management Operational efficiency O&M/MW thermal (k ) 13.9 11.4 10.6 10.2 2002 Actual 2004 Actual 2005 Actual 2007 Target Total Quasar project coal plants availability (%) Thermal: Quasar project plants imbalanced production (%) 89.8 86.8 Quasar project to yield 50 mn per year of benefits starting from 2005 6.4 3.4 2004 2005 2004 2005 24
Generation & Energy Management Growth in renewables - Italy Investments ( bn) 112MW additional renewable capacity in 2005 1.3 0.8 Wind Hydro Geothermal 2003-2005 2006-2010 Pursuing growth in renewables with 300 MW of additional capacity in 2006-2010 25
Generation & Energy Management Strategy Conversion Plan Coal conversion program on track Torre Nord: plant operational by 2008 Porto Tolle: plant operational by 2010 Operational efficiency Continuous improvement thanks to a total quality approach 50 mn per year of economic benefits starting from 2005 thanks to the Quasar project Renewables Pursuing growth in renewables 300MW of additional capacity in the 2006-2010 period Reinforcing leadership in the domestic generation market 26
Agenda 2005 Results Luigi Ferraris 2006-2010 plan Market Francesco Starace Generation & Energy Management Sandro Fontecedro Infrastructure & Network Livio Gallo International Activities Fulvio Conti Strategy and Targets Fulvio Conti Questions & Answers Annexes 27
Infrastructure & Network Evolution of electricity and gas Electricity distributed (TWh) Gas distributed (bcm) Current market share: 81% Current market share: 8% 274 251 251 258 3.7 3.9 4.1 4.6 2004 2005 2007 2010 2004 2005 2007 2010 2005-2010 CAGR 1.9% 2005-2010 CAGR 2.9% 31 million end-users connected by 2010 2.5 million end-users connected by 2010 28
Infrastructure & Network Results delivered: electricity Efficiency - Cash cost ( /customer) Quality - Minutes lost per customer 153 Opex Capex (1) 128-50% 103 125 119 73 64 89 84 50 36 35 2001 2004 2005 2001 (2) 2004 (2) 2005 (2) 1,000 mn savings (3) per year 2002-2005 cumulated quality bonus >450 mn (1) Excluding AMM project (2) Including third parties damages in according to new Italian Regulatory Authority rules (3) Vs 2001 29
Infrastructure & Network Results delivered: gas Bcm 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Bcm End-users 2000 2001 2002 2005 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Thousand customers Second largest operator in Italy with 2 million end-users 30
Infrastructure & Network Automatic Meter Management Remote readings (mn) Remote operations (mn) 142 6.1 96 30mn units installed by end 2006 3.5 13 0.9 2004 2005 2006 2004 2005 2006 Improved accuracy and efficiency Fraud reduction Reduction in call-outs Bad-debt management Significant improvements in efficiency (1) Vs 2001 31
Infrastructure & Network Continuous process re-engineering Palm-top to field units Work force management Network automation On-line maintenance schedule Continuous access to the central database Real-time localization of vehicles Optimization of field operational unit activities HV and MV network remotely operated Automatic fault clearing procedures Cost reduction (1) 150 mn by 2007 (1) Vs 2004 32
Infrastructure & Network Risk-based asset management Efficiency Capex (1) per customer ( ) Quality - Investments and service level Enel UK comparables 35 73 64 56 Minutes lost Investments ( mn) 47 990 973 931 Spain comparables 47 2005 2007 2010 Tight control of investments Investments based on scale of risk of network assets (1) Excluding AMM project 33
Infrastructure & Network Cash-cost per customer of electricity distribution Euros per customer Opex Capex (1) 1,000 mn savings per year 119 113 107 Additional 360 mn savings per year 84 79 76 35 34 31 2005 2007 2010 1,360 mn of savings per year by 2010 (2) (1) Exluding AMM project (2) Vs 2001 34
Agenda 2005 Results Luigi Ferraris 2006-2010 plan Market Francesco Starace Generation & Energy Management Sandro Fontecedro Infrastructure & Network Livio Gallo International Activities Fulvio Conti Strategy and Targets Fulvio Conti Questions & Answers Annexes 35
International activities European regional markets: Enel s position Northern Pool Iberia Central EU + Centrel + Italy Southern-Eastern EU Becoming a leader in the European market 36
International activities Iberia: Spain Current market scenario Demand growing 4% per year Pool price almost doubled in 2005 Enel s current position Installed capacity: 2,600MW (of which 1,000MW in renewables) Production market share: exceeding 4% Customers: more than 600,000 2005 EBITDA: 284 mn (+42% on 2004) Development of Enel s position Installed capacity: 1,625 mn investments to upgrade and increase capacity by 2010 2,000MW CCGT 700MW wind and hydro Implementation of digital meter system by 2009 37
International activities Southern-Eastern Europe: Romania Current market scenario EU membership in 2007 Full liberalisation of non-residential market starting from 2006 High return on investment GDP growing 4-5% per year Enel s current position Electricity sold: 3.2TWh Electricity distributed: 4.5TWh Market share in electricity sales: c20% Customers: 1.4mn 2005 EBITDA: 82 mn, significantly above acquisition business plan Development of Enel s position 333 mn investments planned for Banat and Dobrogea Shortlisted in the acquisiton of Muntenia Sud Interested in generation assets 38
International activities Centrel: Slovakia Current market scenario High interconnection capacity Few new plants expected to be built in the region Wholesale market price converging to German level Enel s current position Installed capacity: 6,400MW Efficient production mix Domestic sales: 20TWh Active energy trading with countries nearby Development of Enel s position 80 mn investments to uprate nuclear plants 2 nuclear plants under study 173 mn investments in renewables Development platform for Centrel market 39
International activities Northern and Latin America Current market scenario Favourable regulatory framework for renewables Opportunities to grow in geothermal in Latin America Enel s current position Installed capacity: 600MW (completely in renewables) of which 400MW in NA 200MW in LA EBITDA 2005: 72 mn (+24% pm 2004) and continuously growing since 2001 Development of Enel s position Consolidation of portfolio in NA Opportunities in small hydro and wind in NA Consolidation of Lageo in LA Greenfield opportunities in hydro and geo in LA 40
Agenda 2005 Results 2006-2010 plan Market Generation & Energy Management Infrastructure & Network International Activities Strategy and Targets Luigi Ferraris Francesco Starace Sandro Fontecedro Livio Gallo Fulvio Conti Fulvio Conti Questions & Answers Annexes 41
Strategy and targets Strategy: three clear priorities Retain our market leadership in Italy in a liberalising market Improve customer value through continued investment program and cost leadership Continue to invest in and grow our European energy and International renewables activities, organically and by acquisitions Becoming one of the largest European electricity and gas players by 2010 42
Strategy and targets Overall financial targets Annual OPEX reduction 2005-2007 (1) EBITDA CAGR 2005-2007 EBITDA - International 2007 (% of total) ROACE (2007) >Euro200mn 3% > 10% 17% Further growth will come from new international acquisitions (1) It does not consider any change in the scope of consolidation 43
Strategy and targets Strategic considerations Enel has already an established European footprint European market is consolidating High capex requirements Long term investment cycle Effective counter-balance to global energy companies Scale delivers more value to consumers Enel is a well capitalised, efficient and integrated operator Strong balance sheet Good fuel mix Technology leader Enel will be a pan-european leader in the energy and gas business Size, efficiency and geography matter 44
Agenda 2005 Results 2006-2010 Plan Market Generation & Energy Management Infrastructure & Network International Activities Strategy and Targets Luigi Ferraris Francesco Starace Sandro Fontecedro Livio Gallo Fulvio Conti Fulvio Conti Questions & Answers Annexes 45
Agenda 2005 Results 2006-2010 Plan Market Generation & Energy Management Infrastructure & Network International Activities Strategy and Targets Luigi Ferraris Francesco Starace Sandro Fontecedro Livio Gallo Fulvio Conti Fulvio Conti Questions & Answers Annexes 46
Annexes Income statement ( mn) 2004 2005 % Operating revenues 31,011 34,059 9.8% Operating costs 22,940 26,314 14.7% EBITDA (1) 8,071 7,745-4.0% % of revenues 26% 23% EBIT 5,870 5,538-5.7% % of revenues 19% 16% (1) 2004 EBITDA includes Euro 1,068mn for past stranded costs 47
Annexes From EBIT to EPS ( mn) 2004 2005 % EBIT 5,870 5,538-5.7% Net financial charges -852-744 -12.7% EBT 5,018 4,794-4.5% Net income continuing operations 2,902 2,860-1.4% Net income discontinued operations -155 1,272 Net income (including third parties) 2,747 4,132 50.4% Group net income 2,631 3,895 48.0% EPS ( ) 0.43 0.63 48
Annexes Balance sheet ( mn) 2004 2005 % Net financial debt 24,514 12,312-49.8% Shareholders' equity 19,066 19,416 1.8% Net capital employed 43,580 31,728-27.2% (1) ROACE = EBIT/Average Net Capital Employed. EBIT does not include 1,068 mn for past stranded costs 49
Annexes EBIT by business area ( mn) Services & Holding -332mn 5,870 5,538 646 195-5.7% -69.8% Network & Sales 2,693 2,778 +3.2% Generation & Energy Management 2,531 2,565 +1.3% 2004 2005 50
Annexes Generation & Energy Management ( mn) 2004 2005 % Revenues (1) 13,028 14,215 9.1% Italy 12,446 13,376 7.5% International 622 914 46.9% EBITDA 3,780 3,705-2.0% Italy 3,565 3,415-4.2% International 215 290 34.9% EBIT 2,531 2,565 1.3% Italy 2,435 2,403-1.3% International 96 162 68.8% Capex 857 1,027 19.8% Net capital employed 14,931 14,700-1.5% Headcount 10,828 9,904-8.5% (1) Total revenues net of -40 mn and -75 mn intercompany adjustments in 2004 and 2005, respectively 51
Annexes Network & Sales ( mn) 2004 2005 % Revenues (1) 19,254 20,422 6.1% Power 17,865 18,818 5.3% Italy 17,474 17,905 2.5% International 391 913 133.5% Gas 1,396 1,602 14.8% EBITDA 3,530 3,737 5.9% Power 3,305 3,495 5.7% Italy 3,228 3,303 2.3% International 77 192 149.4% Gas 225 242 7.6% (1) Total revenues net of -7 mn and Euro +2 mn intercompany adjustments in 2004 and 2005, respectively 52
Annexes Network & Sales - Continued ( mn) 2004 2005 % EBIT 2,693 2,778 3.2% Power 2,551 2,630 3.1% Italy 2,505 2,487-0.7% International 46 143 210.9% Gas 142 148 4.2% Capex 1,711 1,692-1.1% Net capital employed 12,334 13,421 8.8% Headcount 35,537 35,783 0.7% 53
Annexes Services & Holding ( mn) 2004 2005 % Revenues 3,443 2,763-19.8% Holding 1,649 1,103-33.1% Services and other 1,794 1,660-7.5% EBITDA 866 316-63.5% Holding 652 67-89.7% Services and other 214 249 16.4% EBIT 753 207-72.5% Holding 647 53-91.8% Services and other 106 154 45.3% 54
Annexes Services & Holding - Continued ( mn) 2004 2005 % Capex 122 110-9,8% Holding 10 11 10,0% Services and other 112 99-11,7% Net capital employed (1) 885 639-27,8% Headcount 4.416 6.091 37,9% Holding 590 569-3,6% Services and other 3.826 5.522 44,3% (1) Services and other only 55
Annexes Capex by business area: continuing operations ( mn) +139mn +5.2% Services & Holding 2,690 122 2,829 110-9.6% Network & Sales 1,711 1,692-1.1% Generation & Energy Management 857 1,027 +19.9% 2004 2005 56
Annexes Debt structure Average debt maturity: 7 years and 7 months Average cost of debt: 4.3% (Fixed+hedged)/Total long-term debt: 84% (Fixed+hedged)/Total net debt: 81% Rating: S&P s = A+/A-1 negative; Moody s = Aa3/P-1 stable ( mn) 2004 (1) 2005 % Long-term 18,696 10,904-41.7% Short-term (2) 6,589 2,296-65.2% Cash (3) -771-888 15.2% Net debt 24,514 12,312-49.8% (1) Including both continuing and discontinued operations (2) Including current maturities of long-term debt (3) Including factoring receivables 57
DISCLAIMER THESE SLIDES HAVE BEEN PREPARED BY THE COMPANY SOLELY FOR THE USE AT THE ANALYST CONFERENCE CALL ON ENEL S FULL YEAR 2005 CONSOLIDATED RESULTS AND 2006-2010 PLAN. THE INFORMATION CONTAINED HEREIN HAS NOT BEEN INDEPENDENTLY VERIFIED. NONE OF THE COMPANY OR REPRESENTATIVES SHALL HAVE ANY LIABILITY WHATSOEVER IN NEGLIGENCE OR OTHERWISE FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THESE SLIDES OR THEIR CONTENTS OR OTHERWISE ARISING IN CONNECTION WITH THESE SLIDES OR ANY MATERIAL DISCUSSED DURING THE ANALYST PRESENTATION. THIS DOCUMENT IS BEING FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. THE INFORMATION CONTAINED HEREIN AND OTHER MATERIAL DISCUSSED DURING THE ANALYST PRESENTATION MAY INCLUDE FORWARD-LOOKING STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS ABOUT THE COMPANY S BELIEFS AND EXPECTATIONS. THESE STATEMENTS ARE BASED ON CURRENT PLANS, ESTIMATES, PROJECTIONS AND PROJECTS, AND THEREFORE YOU SHOULD NOT PLACE UNDUE RELIANCE ON THEM. FORWARD-LOOKING STATEMENTS INVOLVE INHERENT RISKS AND UNCERTAINTIES. WE CAUTION YOU THAT A NUMBER OF IMPORTANT FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO: TRENDS IN ENEL S CORE ENERGY BUSINESS, ITS ABILITY TO IMPLEMENT COST- CUTTING PLANS, CHANGES IN THE REGULATORY ENVIRONMENT AND FUTURE CAPITAL EXPENDITURES. 58
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