Half-yearly Report

NEW YORK--(BUSINESS WIRE)--

RESULTS

JANUARY-JUNE 2010

Madrid, 28 July 2010

ENDESA reported net income of Euro 2,120 million in 1H10.

ENDESA reported net income of Euro 2,120 million in 1H10, Euro 143 million lower than in the same period last year. This decline is due to a Euro 146 million fall in net income from asset disposals compared to the same period a year earlier.

The table below shows the breakdown of net income by region and the year-on-year change:

ENDESA FIRST HALF 2010 NET INCOME
	Euro million	% Chg 1H09	% contribution to total net income
Spain, Portugal and Other	1,808	(8.8)	85.3
Latin America	312	11.4	14.7
TOTAL	2,120	(6.3)	100.0

Generation and electricity sales

ENDESA’s power output in January-June 2010 totalled 61,754 GWh, 12.3% less than in the first half of 2009. Electricity sales were 85,772 GWh, up 2.2%.

GENERATION AND ELECTRICITY SALES IN 1H10
	Output		Sales
	GWh	% Chg 1H10	GWh	% Chg 1H09
Spain, Portugal and Other	32,143	(16.2)	52,775	-
Latin America	29,611	(7.6)	32,997	5.9
TOTAL	61,754	(12.3)	85,772	2.2

EBITDA increased by 3.1%, despite lower output levels and lower prices in the wholesale markets

Despite the fall in output, the increase in energy sold and margins on sales resulted in a 3.1% year-on-year rise in EBITDA in the first half of 2010 to Euro 3,850 million.

This increase in EBITDA is the result of the 34.3% rise in revenue (to Euro 15,113 million), 63.4% growth in variable costs and the containment of fixed costs, which increased by just 4.0%. EBIT was Euro 2,811 million, up 3.8% year-on-year.

The table below shows the breakdown of EBITDA and EBIT by region and depicts the year-on-year trend.

	Revenues		EBITDA		EBIT
	Euro million	% Chg vs 1H09	Euro million	% Chg vs 1H09	Euro million	% Chg vs 1H09
Spain, Portugal and Other	10,526	49.1	2,272	4.1	1,603	11.2
Latin America	4,587	9.4	1,578	1.6	1,208	(4.7)
TOTAL	15,113	34.3	3,850	3.1	2,811	3.8

Net financial result: Euro 592 million (+0.3%)

ENDESA reports a net financial result of Euro 592 million in the first half of 2010, Euro 2 million more than the same period last year.

Net financial expenses were Euro 573 million, up 6.3% year-on-year, while foreign exchange differences generated a loss of Euro 19 million compared to the loss of Euro 51 million seen in the same period last year.

The increase in net financial expense was the result of restatement of Euro 77 million of finance revenues recorded in previous years resulting from the accrual of interest on the shortfall between the effective contribution date and the start of the following year, in accordance with the provisions of Royal Decree Law 6/2010.

Net gains from asset disposals

In March 2010 the Enel Group integrated the renewable energy activities of ENDESA and Enel Green Power (EGP) in Spain and Portugal into a single organisation within the scope of EGP, a company which is 100% owned by Enel.

Prior to this integration ENDESA Cogeneración y Renovables (Ecyr) paid a dividend of Euro 366 million and reduced capital by Euro 128 million. Subsequently, ENDESA sold 30% of its Ecyr subsidiary to EGP for Euro 326 million, generating a gross capital gain of Euro 313 million and EGP subscribed to a capital increase in Ecyr which enabled it to obtain a shareholding of 60% in that company, diluting ENDESA’s holding in this company to 40%. This capital increase was subscribed by EGP through a cash contribution of Euro 534 million and shares representing 50% of Enel Unión Fenosa Renovables (Eufer) valued at Euro 280 million.

As a result of this operation, ENDESA no longer exercises control over Ecyr (now EGP España). Therefore, in accordance with current accounting regulations, ENDESA has recorded its 40% holding in Ecyr at fair value, recording income before tax of Euro 730 million in the “Income from asset disposals” heading of the Consolidated Income Statement, as accounting regulations regard the loss of control of a subsidiary as a swap between the net assets retired from the Consolidated Balance Sheet and the shares added thereto.

In addition, in 2010 ENDESA has completed the disposal of its 1% holding in Red Eléctrica Corporación (REC) for Euro 51 million, reporting income before tax of Euro 36 million in the Consolidated Income Statement for the first half of 2010, in addition to the Euro 5 million recorded in 2009.

Cash flow from operating activities: Euro 2,591 million

Cash flow from operating activities totalled Euro 2,591 million in the first half of 2010, an increase of 1.3% on 1H09.

CASH FLOW FROM OPERATING ACTIVITIES
	Euro million	% change vs 1H09
Spain, Portugal and Other	1,575	7.0
Latin America	1,016	(6.4)
TOTAL	2,591	1.3

Investment: Euro 1,041 million

ENDESA invested a total of Euro 1,041 million in the first half of 2010. Of this figure, Euro 922 million related to capex and intangible investments and the remaining Euro 119 million to financial investments.

INVESTMENTS
	Euro million
	Capex and intangible assets	Financial investments	TOTAL
Spain, Portugal and Other	612	48	660
Latin America	310	71	381
TOTAL	922	119	1,041

Financial position

ENDESA had net financial debt of Euro 19,098 million at 30 June 2010, an increase of Euro 554 million compared to 31 December 2009.

BREAKDOWN OF NET DEBT BY BUSINESS LINE
	Euro million
	30/06/10	31/12/09	Difference	% Chg
Business in Spain, Portugal and Other	13,591	13,865	(274)	(2.0)
Business in Latin America - Enersis Group - Other	5,507 5,269 238	4,679 4,191 488	828 1,078 (250)	17.7 25.7 (51.2)
TOTAL	19,098	18,544	554	3.0

This increase in net debt is the result of the conversion to euros of debt held by the group in other currencies as a result of the depreciation of the euro during the period to the amount of Euro 722 million.

When assessing ENDESA’s debt levels, it must be remembered that at 30 June 2010, the company had the recognised right to collect Euro 7,727 million in connection with several regulatory matters affecting the Spanish electricity business: Euro 5,216 million relating to financing the revenue shortfall in regulated activities; and Euro 2,511 million in compensation for stranded costs in non-mainland generation in Spain, which is expected to be securitised in the coming months once the irrevocable commitment made by ENDESA on 7 July to transfer deficit collection rights to the Deficit Securitisation Fund for the Electricity System will be authorised.

Stripping out these regulatory items, ENDESA’s net debt at the end of June 2010 stood at Euro 11,371 million.

ENDESA’s average cost of debt was 4.4% in 1H10. The average cost of debt corresponding to the Enersis Group was 8.4%. Excluding Enersis Group debt, the average cost of ENDESA’s debt was 2.7% in the period.

STRUCTURE OF ENDESA’S NET DEBT
	ENDESA and direct subsidiaries		Enersis Group		TOTAL ENDESA Group
	Euro million	% of total	Euro million	% of total	Euro million	% of total
Euro	13,750	99	-	-	13,750	72
Dollar	78	1	1,822	35	1,900	10
Other currency	1	-	3,447	65	3,448	18
TOTAL	13,829	100	5,269	100	19,098	100
Fixed rate	4,898	35	2,352	45	7,250	38
Hedged	1,569	11	-	-	1,569	8
Variable	7,362	54	2,917	55	10,279	54
TOTAL	13,829	100	5,269	100	19,098	100
Avg. life (years)	3.0		5.5		3.8

ENDESA had liquidity in Spain of Euro 4,868 million at the end of the first half of 2010, sufficient to meet the group’s total debt repayments over the next 18 months: of this amount, Euro 4,728 million corresponded to undrawn sums on unconditional credit lines.

Meanwhile, the Enersis Group held cash and cash equivalents totalling Euro 1,010 million and Euro 766 million in undrawn, unconditional credit lines, covering debt maturities for the next 17 months.

As of the date of release of earnings for the first half of 2010, ENDESA’s long-term debt ratings were: “A3” at Moody’s with a negative outlook; “A-" at Standard & Poor's; and “A" at Fitch, both with a stable outlook.

Equity: Euro 21,588 million

ENDESA’s consolidated equity was Euro 21,588 million at 30 June 2010, Euro 2,628 million higher than at 31 December 2009.

Of this amount, Euro 16,236 million corresponded to ENDESA S.A. shareholders and Euro 5,352 million to minority shareholders of group companies.

Net equity corresponding to shareholders of ENDESA, S.A. increased by Euro 2,009 million compared to 31 December 2009, mainly as a result of:.

• Earnings generated during the period.
• Positive foreign exchange differences were Euro 623 million in the first half of 2010 as a result of converting the net assets of the group’s LatAm companies to euros on the back of the appreciation of local currencies against the euro.
• The recognition of a Euro 559 million final dividend against 2009 earnings approved by shareholders at the General Meeting on 21 June 2010 and paid on 1 July 2010.

Financial leverage

The changes in group equity and net debt resulted in leverage of 88.5% on 30 June 2010, compared to 97.8% on 31 December 2009.

Assets held for sale

At 30 June 2010 ENDESA’s consolidated balance sheet included certain assets classified as held for sale because proceedings had started by that date for their disposal and are expected to be completed within a year. The main assets are:

• Assets of ENDESA Hellas. On 1 July 2010 ENDESA completed the sale of its 50.01% stake in Endesa Hellas to Mytilineos, as agreed on 16 March, for a price of Euro 140 million. The operation will be recognised in the second half of 2010 and will not imply the recognition of results.
• The power transmission network assets the in Spain currently owned by the ENDESA Group. On 1 July 2010 the agreement to sell these assets to Red Eléctrica de España, S.A.U. was signed. The transaction includes the sale of assets in operation that grant remuneration rights for power transmission in 2010, in addition to assets under construction, scheduled to come onstream in 2010 and conferring remuneration rights for power transmission in 2011. The transaction includes the island power transmission networks (Canary and Balearic Islands) and mainland transmission assets. The price of the assets in operation to be sold totals Euro 1,270 million and the price of the assets under construction is Euro 142 million. In addition, the two companies have signed a Technical Assistance Agreement for four years and a total amount of Euro 66 million. The contract is subject to the condition that both parties obtain approval from the corresponding regulatory authorities. The transaction is expected to generate a capital gain of approximately Euro 750 million. This is a provisional figure, the definitive one will depend on different issues within the scope of the agreement signed on 1 July.
• Distribution and transmission gas assets in Spain. A process is underway which may result in the sale of 80% of the shares of ENDESA Gas, subject to a call option in favour of ENDESA.
• The assets of the group headed by the Chilean company, Compañía Americana de Multiservicios (CAM).
• The assets relating to the group’s stake in Iniciativas del Gas, including the 40% interest in this company, which holds a 50% stake in the Sagunto regasification plant. In April an agreement was reached with Osaka Gas for the sale of this interest, which is awaiting approval from the pertinent regulatory authorities. The sale price will be Euro 43 million, with a gross capital gain of Euro 30 million.

The group has also initiated proceedings to sell some of the assets of the group headed by Synapsis. These assets were not classified as held for sale at 30 June 2010 as a number of preparatory steps must be taken prior to classification.

Accounting presentation criteria

In accordance with the provisions of European accounting regulations, from 2010 the group has adopted IFRIC 12 “Service Concession Arrangements”. This is mainly applicable to electricity distribution concessions in Brazil, and entails a modification to the consolidated balance sheet for 31 December 2009 (presented here for comparative purposes) with a Euro 2,146 million reduction in fixed assets and a Euro 1,818 million increase in intangible assets. Adopting IFRIC 12 has had no significant impact on income or net equity.

BUSINESS IN SPAIN, PORTUGAL AND OTHER

Net income – Spain, Portugal and Other: Euro 1,808 million

Net income from ENDESA’s business in Spain, Portugal and Other was Euro 1,808 million in the first half of 2010, Euro 175 million lower than the same period in 2009, contributing 85.3% of the company’s total net income. This decline was mainly due to the fall in net income from asset disposals, which was down Euro 150 million compared with the same period in 2009.

EBITDA totalled Euro 2,272 million, up 4.1% year-on-year, and EBIT rose 11.2% to Euro 1,603 million.

BUSINESS IN LATIN AMERICA

Net income of Euro 312 million

In Latin America, first half net income rose 11.4% year-on-year to Euro 312 million.

EBITDA increased by 1.6% year-on-year to Euro 1,578 million.

Important legal disclaimer

This document contains certain "forward-looking" statements regarding anticipated financial and operating results and statistics and other future events. These statements are not guarantees of future performance and they are subject to material risks, uncertainties, changes and other factors that may be beyond ENDESA’s control or may be difficult to predict.

Forward-looking statements include, but are not limited to, information regarding: estimated future earnings; anticipated increases in wind and CCGT generation and market share; expected increases in demand for gas and gas sourcing; management strategy and goals; estimated cost reductions; tariffs and pricing structure; estimated capital expenditures and other investments; estimated asset disposals; estimated increases in capacity and output and changes in capacity mix; repowering of capacity and macroeconomic conditions. The main assumptions on which these expectations and targets are based are related to the regulatory setting, exchange rates, divestments, increases in production and installed capacity in markets where ENDESA operates, increases in demand in these markets, assigning of production amongst different technologies, increases in costs associated with higher activity that do not exceed certain limits, electricity prices not below certain levels, the cost of CCGT plants, and the availability and cost of the gas, coal, fuel oil and emission rights necessary to run our business at the desired levels.

In these statements we avail ourselves of the protection provided by the Private Securities Litigation Reform Act of 1995 of the United States of America with respect to forward-looking statements.

The following important factors, in addition to those discussed elsewhere in this document, could cause actual financial and operating results and statistics to differ materially from those expressed in our forward-looking statements:

Economic and industry conditions: materially adverse changes in economic or industry conditions generally or in our markets; the effect of existing regulations and regulatory changes; tariff reductions; the impact of any fluctuations in interest rates; the impact of fluctuations in exchange rates; natural disasters; the impact of more stringent environmental regulations and the inherent environmental risks relating to our business operations; the potential liabilities relating to our nuclear facilities.

Transaction or commercial factors: any delays in or failure to obtain necessary regulatory, antitrust, internal and other approvals for our proposed acquisitions, investments or asset disposals, or any conditions imposed in connection with such approvals; our ability to integrate acquired businesses successfully; the challenges inherent in diverting management's focus and resources from other strategic opportunities and from operational matters during the process of integrating acquired businesses; the outcome of any negotiations with partners and governments. Delays in or impossibility of obtaining the pertinent permits and rezoning orders in relation to real estate assets. Any delays in or failure to obtain necessary regulatory approvals, including environmental approval, to construct new facilities, repowering or enhancement of existing facilities; shortages or changes in the price of equipment, materials or labour; opposition of political and ethnic groups; adverse changes in the political and regulatory environment in the countries where we and our related companies operate; adverse weather conditions, which may delay the completion of power plants or substations, or natural disasters, accidents or other unforeseen events; and the inability to obtain financing at rates that are satisfactory to us.

Political/governmental factors: political conditions in Latin America; changes in Spanish, European and foreign laws, regulations and taxes.

Operating factors: technical difficulties; changes in operating conditions and costs; the ability to implement cost reduction plans; the ability to maintain a stable supply of coal, fuel and gas and the impact of fluctuations on fuel and gas prices; acquisitions or restructurings; the ability to implement an international and diversification strategy successfully.

Competitive factors: the actions of competitors; changes in competition and pricing environments; the entry of new competitors in our markets.

Further details on the factors that may cause actual results and other developments to differ significantly from the expectations implied or explicitly contained in this document are given in the Risk Factors section of the current ENDESA Share Registration Statement filed with the Comisión Nacional del Mercado de Valores (the Spanish securities regulator or the “CNMV” for its initials in Spanish).

No assurance can be given that the forward-looking statements in this document will be realised. Except as may be required by applicable law, neither ENDESA nor any of its subsidiaries intends to update these forward-looking statements.

For additional information please contact Investor Relations

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